ORDER
I.S. Nigam, Accountant Member
1. This is an appeal filed by the assessee against the order of the Appellate Assistant Commissioner of Wealth-tax, ‘C Range, Bombay.
2. None turned up on behalf of the assessee when the appeal came up for hearing on 23-4-1987. There was no application for adjournment of the date fixed for hearing, On the earlier occasion also, even though when the appeal came up for hearing on 4-2-1987 and the hearing of the appeal was adjourned on the request of the assessee’s counsel Shri Iyer to 9-2-1987 under intimation to him, none turned up on behalf of the assessee on the adjourned date, that is 9-2-1987. The appeal has, therefore, to be decided on the basis of the material on the record and the submissions of the learned Departmental Representative Shri Vishwanathan.
3. The record shows that the assessee is an individual and the appeal relates to the assessment year 1979-80. The assessee had taken a loan for the purchase of shares and the liability on this account, on 31-3-1979 that is the relevant valuation date, was Rs. 1,31,601. It was claimed before the Wealth-tax Officer that this liability of Rs. 1,31,601 should be allowed as a deduction against the value of shares which was disclosed at Rs. 2,83,150. The Wealth-tax Officer, however, held that since the liability represented debts which were secured on or which had been incurred in relation to shares in respect of which wealth-tax was not chargeable, the olaim of deduction of this liability in working out the net wealth was not admissible. The Wealth-tax Officer, therefore, allowed exemption from the value of shares to the extent of Rs. 1,50,000 as laid down under Section 5(1A) of the Wealth-tax Act, 1957, and included the balance, that is Rs. 1,33,150 in the assessee’s net wealth. On appeal, the Appellate Assistant Commissioner on this issue agreed with the Wealth-tax Officer and refused to interfere. The assessee has, therefore, come up in further appeal before us.
4. According to the grounds of appeal the AAC wrongly held that the assessee was not entitled to the claim of deduction of liabilities amounting to Rs. 1,31,601 against the value of shares of Indian Companies belonging to her, the provisions of Section 2(m)(ii) have been misconstrued and, in any case, the claim of deduction ought to have been considered against the value of taxable shares amounting to Rs. 1,33,150 which was included in the assessee’s net wealth.
5. On the other hand, the learned Departmental Representative Shri Vishwanathan cited before us the Full Bench ruling of the Hon’ble High Court of Madras in the case of CWT v. K.S. Vaidya-nathan [1985] 153 ITR 11 wherein their Lordships laid down that where the debts, deduction of which was claimed, were secured on assets part of whose value was exempt from wealth-tax, the debts have got to be disallowed in proportion to the exempted value of the assets. On this basis, according to Shri Vishwanathan, the debt of Rs. 1,31,601 has to be apportioned between the value of shares which have been exempted from wealth-tax and the value of shares which have not been exempted from wealth-tax and included in the assessee’s net wealth and the claim of deduction of the debts has to be limited to what would be apportioned to the value of the assets which was not exempted from wealth-tax and was included in the assessee’s net wealth. He also relied on the orders of the WTO and the AAC in support of the department’s case.
6. We have carefully considered the material on the record and the submissions of the learned Departmental Representative Shri Vishwanathan. At the outset it will be necessary here to point out that in the case of K.S. Vaidyanathan (supra) there was a difference of opinion among the learned Judges of the Full Bench of the Hon’ble High Court of Madras on how the apportionment of the debt should be done between the assets which were exempted from wealth-tax and the assets which were not exempt. On the other hand, the Central Board of Direct Taxes, by Instruction No. 1070 dated 28-6-1977, examined this very issue and directed that where debts are secured on, or have been incurred in relation to an asset which is partly exempt under Section 5(1) of the Wealth-tax Act, 1957, the claim of deduction of such debt will have to be allowed to the extent of the value of that asset which has been included in the net wealth. There is the authority of the Hon’ble Supreme Court in the cases of Navnit Lai C. Javeri v. K.K. Sen, AAC [1965] 56 ITR 198 and Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 wherein their Lordships laid down that the circulars issued by the Central Board of Direct Taxes were with a view to find a solution to complicated issues and, therefore, even if they deviated from the provisions of the Act, they were binding on the revenue authorities. This was particularly so when the circular was beneficial to the assessee. Viewed in this context we have no hesitation in holding that the assessee was entitled to the claim of deduction of the debt of Rs. 1,31.601 incurred for the purchase of shares of the total value of Rs. 2,83,150 out of the value of those shares which were not exempt from wealth-tax and were included in the assessee’s net wealth, that is Rs. 1,33,150. The claim of deduction of Rs. 1,33,601 in working out the assessee’s net wealth should, therefore, be allowed now.
7. The appeal is allowed.