Om Prakash, J. - (1.) THE Income-tax Appellate Tribunal (Delhi Bench) referred the following question under Section 27(1) of the Wealth-tax Act, 1957 (briefly "the Act"), for the opinion of this court : " Whether, on the facts and in the circumstance of the case, the assessee is entitled to the deduction from his net wealth of Rs. 79,896 representing his debit balance in his capital account in the firm, Messrs. Sonpal Vidya Charan ?"
(2.) THE assessee in the status of an individual filed his wealth-tax return for the assessment year 1976-77 claiming deduction in respect of his debit balance of Rs. 79,896 in the capital account of the firm ; Sonpal Vidya Charan, in which he was a partner in view of the provisions of Section 2(m) of the Act. THE Wealth-tax Officer rejected the claim of the assessee observing : "THE assessee's capital in Sohpal Vidya Charan shows debit balance of Rs. 79,896. THE firm attracts provision of Section 5(1)(xxxii). Capital balance whether debit or credit in the books Of the firm cannot be considered for any Other purposes." Rejecting the claim of deduction of the debit balance, the Wealth-tax Officer included the debit balance of Rs. 79,896 in the wealth of the assessee. The assessee carried the dispute in appeal to the Appellate Assistant Commissioner. He held that the value of the assessee's interest in the assets of a firm which is an industrial undertaking within the meaning of the Explanation to Clause (xxxi) of Section 5(1) of the Act "is not to be included in his net wealth."
(3.) HE further held ; " The Act does not, however, provide that the debits arising on account of investment in exempted assets should be allowed as deduction. In my opinion, the assessee is not entitled to deduction for the debit balance of Rs. 79,896 in a firm covered under the provisions of Section 5(1)(xxxii) but the Wealth-tax Officer has certainly erred in including the debit balance in the Wealth of the assessee. The debit balance of Rs. 79,896 will have to be ignored." The assessee then appealed to the Appellate Tribunal. Divergent views were taken by the Accountant Member and the Judicial Member of the Appellate Tribunal and then the matter was referred to a Third Member, who agreed with the view taken by the Accountant Member.;