[The Order was passed by Umar Ata Bandial, C.J.] - The impugned order passed by a learned Division Bench of Income Tax Appellate Tribunal dated 30-11-2000 ("Tribunal") has been challenged by the petitioner on the grounds that are reproduced in the order of this Court dated 13-2-2013.
That order is: "Learned counsel for the petitioner submits that the loan in issue was incurred in relation to assets which were taxable and therefore such loan was liable to be deducted from gross wealth under the provisions of section 2(16)(ii) of the Wealth Tax, Act, 1963 ("Act"). The fact that the assets for which loan had been taken were over a period of time sold on account of exigency of business does not convert the debt incurred by the petitioner to one that was created for non-taxable assets. The respondent Income Tax Appellate Tribunal ("Tribunal") has vide order dated 30-11- 2000 stretched the meaning of aforenoted provision to include taxable assets sold to be within the meaning of non-taxable assets. The order of the learned Tribunal has taken the view that for debt to be deducted from gross wealth it is necessary that the taxable assets for which it is incurred must be in existence in order to be taxed. Accordingly, it is observed that the exemption of the debt is based on actual collection of tax on the assets for which such liability had been incurred.
Prima facie, the view taken by the learned Tribunal has the force of simplicity and practicability.
However, taxation is a matter which must be explicitly made out from the charging provisions. In the present case, learned counsel for the petitioner submits that the payment of wealth tax on the connected assets is not necessary in terms of aforenoted section 2( 16)(ii) of the Act but merely the taxability of such assets is necessary."
2. Learned counsel for the respondent department has defended the impugned order by referring, in the first instance, to the premise on which it is based. It is reflected in para 8 of the impugned order which is reproduced below:- "It is not enough that these assets be "chargeable" to wealth tax. Rather, it is our view that the law requires that these assets he available for charge of wealth tax and where these are not available for any reason so that wealth tax demand cannot possibly be raised against them, then the liability claim must be restricted to that extent as per statutory stipulation i. e. Section 2(16) (ii) of the Wealth Tax Act. It is pointed out that wealth tax is "payable" only when the assets are available for levy of wealth tax, and where the assets are not available, wealth tax would not be payable. "
3. Section 2(1)(16) provides as follows: "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than-
(i) debts which under section 6 are not to be taken into account; and
(ii) debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth-tax is not payable under this Act."
4. He has emphasized that it is settled law that a distinction exists between tax being "chargeable" and tax being "payable". In the present case the debts of the petitioner were incurred for assets that were chargeable/liable to tax. On the other hand section 2(1)(16)(ii) of the Wealth Tax Act, 1963 ("Act") disallows deduction of debts incurred for assets that are exempt from tax. Based on that premise he has argued that the debts that are secured on chargeable and not exempt assets are such debts which ought to be deducted from net wealth of the petitioner assessee.
5. The language of section 2(1)(16)(ii) of the Act uses the expression "payable" rather than "chargeable". The non payability of wealth tax is connected with an asset which is, for one reason or the other, exempt or relieved from such tax payment. It is also true that tax ceases to be payable on an asset that has been disposed of. The debts of an assessee that are eligible for deduction from the value of assets are necessarily those regarding/pertaining to existing assets that are not exempt from tax. Where an asset does not exist, there can be no ground to treat it as a 'chargeable' asset and therefore the debt procuring such asset cannot be deducted from the value of assets.
Therefore, the requirement of non payability of tax is met both in the case of exemption from wealth tax as well as the nor-existence of an asset forming the consideration or security for debt sought to be deducted. In the circumstances, section 2(1)(16)(ii) ibid, as interpreted by the learned Tribunal in respect of otherwise chargeable assets forming consideration or security for debt that have already been sold, is legally correct. Accordingly, this petition is dismissed.