V.K.SINGHAL, J. - (1.) THE following question of law has been referred by the Tribunal arising out of its order in respect of the asst. yr. 1976-77 under s. 27(1) of the WT Act, 1957 (`the Act') : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in saw in holding that the entire amount of loan liability of the assessee towards purchase of 1150 shares of the Bank of Rajasthan Ltd. Should be allowed as a deduction while computing the net value of shares of the said company held by the assessee ignoring any deduction of the said loan liability, which is attributable to any part of the value of the said shares that is otherwise exempt from tax under s. 5(1)(xxiii) of the WT Act, 1957?"
(2.) THE facts as found by the Tribunal are that the assessee is an HUF and was having 800 shares of the Bank of Rajasthan Ltd., the value of which was fully covered by exemption under s. 5(1)(xxiii) of the Act, their value for the asst. yr. 1974-75 being less than Rs. 1,50,000. THE assessee obtained a loan and purchased 1150 shares adjusting 50 percent of the purchase price amounting to Rs. 57,500 out of the borrowed next preceding previous year relevant to the asst. yr. 1973-74. This position continued in the later years except for asst. yrs. 1975-76 and 1976-77, when the amount of borrowed money was reduced to Rs. 1,02,053 in each year. While considering the claim of the non-petitioner assessee in accordance with s. 2(m)(ii) of the Act, the WTO allowed the entire claim of the old 500 shares under s. 5 and the balance amount was also allowed from the total value of newly acquired 1150 shares and the result of this deduction was that out of newly purchased 1150 shares exemption of Rs.42,000 was allowed for the asst. yr. 1972-73, Rs. 47,000 for asst. yr. 1973-74, Rs. 56,500 for asst. yr. 1974-75, Rs. 41,500 for asst. yr. 1975-76 and Rs. 47,760 for asst. yr. 1976-77. THE borrowed money to this extent was treated by the WTO to have been used for acquiring the share and on which no tax was payable. In appeal preferred to the AAC it was found that the value of 1150 shares of the bank was partly charged to tax and partly exempted and it could not be correlated specifically either to the portion of the value which was charged to tax or the portion which was exempted and, therefore, the liability was to be in proportion of the value of the share charged to tax. Before the Tribunal it was submitted that the disallowance out of the liability has to be considered with reference to the investment. The total value of 1150 shares which was charged to tax was Rs. 1,87,425 for the asst. yr. 1975-76 which exceeds the investment made out of the borrowed money, therefore, the question of any reduction in terms of s. 2(m)(ii) from the liability does not arise. The Tribunal found that no part of the borrowed fund was utilised in acquiring 500 old shares which were covered by the exemption amount of Rs. 1,50,000 and the balance out of Rs. 1,50.000 which has been treated as relatable to 1150 newly purchased shares was Rs. 47,700 for the asst. yr. 1976-77. The total liability claimed was Rs. 2,28,103. Thus, the total value of the shares charged to wealth-tax was Rs. 1,87,425. It was found that the value charged exceeded the amount invested out of the borrowed fund and the entire amount of liability without any deduction was allowed. We have considered the arguments of the learned counsel for the parties. The matter in respect of the asst. yr. 1974-75 was considered by this Court in the case of assessee in CWT vs. Sanwarmal Shivkumar (1987) 66 CTR (Raj) 5 : (1988) 171 ITR 377 : (1987) 34 Taxman 492 (Raj) wherein following the circular the reference was answered in favour of the assessee and against the Revenue. Following the said decision we are of the opinion that the Tribunal was justified in holding that the entire amount of loan liability of the assessee towards purchase of 1150 shares of the Bank of Rajasthan Ltd. Should be allowed as a deduction while computing the net value of shares of the said company held by the assessee ignoring any deduction of the said loan liability which is attributable to any part of value of the said shares that is otherwise exempt from tax under s. 5(1)(xxiii) Consequently, the reference is answered in favour of the assessee and against the Revenue. No order as to costs. ;