1347. Amendment of section 2(m) with effect from 1-4-1993 - Clarification regarding
Circular No. 663 was issued by the Central Board of Direct Taxes on 28 September 1993. Its subject is 1347. Amendment of section 2(m) with effect from 1-4-1993 - Clarification regarding.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Denies a deduction for the wealth-tax liability itself in computing taxable net wealth from assessment year 1993-94. Section 2(m) of the Wealth-tax Act, as amended with effect from 1-4-1993, allows deduction only for debts owed on the valuation date incurred in relation to assets liable to wealth-tax; up to assessment year 1992-93 all debts were deductible barring certain excluded ones, and the wealth-tax liability on the net wealth was being allowed as one of them. The Board, on advice, says the wealth-tax liability is not a debt incurred in relation to taxable assets: it is a personal liability of the assessee and is created by statute rather than incurred by him. No deduction for it is therefore to be allowed from assessment year 1993-94 onwards.
A question arose after the amendment of section 2(m) whether the wealth-tax liability could still be deducted in computing taxable net wealth.
1347. Amendment of section 2(m) with effect from 1-4-1993 - Clarification regarding
1. Section 2(m ) of the Wealth-tax Act has been amended with effect from 1-4-1993. Under the amended clause (m) in the computation of the net wealth, the assessee is to be allowed deduction only for the debts owed by him on the valuation date which have been incurred in relation to the assets liable to the wealth-tax. Up to the assessment year 1992-93, the assessee was to be allowed deduction for all the debts owed by him excluding certain debts such as those incurred in relation to or secured on any exempted asset or disputed tax liability. By virtue of this provision, deduction for wealth-tax liability on the net wealth computed on the valuation date was also being granted for the purpose of computing the taxable net wealth.
2. Consequent to the amendment of section 2(m) with effect from the assessment year 1993-94, a question has arisen regarding admissibility of deduction of the wealth-tax liability for the purpose of computing the taxable net wealth. The Board has been advised that the liability under the Wealth-tax Act is not a debt owed by the assessee incurred in relation to the assets taxable under the Wealth-tax Act. The liability of wealth-tax is personal liability of the assessee. Moreover, this liability is not a debt incurred by the assessee but is created by the statute. Therefore, no deduction is to be allowed for the wealth-tax liability in the computation of the taxable net wealth of the assessee from the assessment year 1993-94 onwards.
3. This clarification may be kept into consideration by the assessees which filing their wealth-tax returns.Circular : No. 663, dated 28-9-1993.
In a wealth-tax assessment where the deduction claimed for the wealth-tax liability is disallowed.
Source: the Income Tax Department’s own published text — its page for this instrument.