Wealth tax

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vivek (Querist)
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26 July 2012 Dear Friends,
My company taken Loan form bank for power project and company having wdv of motor car Rs. 45,00,000,
so my question whether loan taken for project is cover under "debts own' by assesses for the purpose Car valuation under wealth tax act as prorata base. If yes then how to compute my wealth regarding car

Amol S Joglekar

Amol S Joglekar (Expert)
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27 July 2012 No. The loan is PROJECT loan and not vehicle loan.

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vivek

vivek (Querist)
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27 July 2012 Thanks Amol Ji but please give me any case
law for satisfaction of same because same
answer was given by me but without having
any case law i am helpless to satisfy to management,
Please send me some case law for

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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03 August 2025 Here’s how you can approach this:
Wealth Tax & Debts Owed – Key Principle:
For the purpose of Wealth Tax, debts deductible against the value of an asset must be directly related to that asset.
If the debt is taken for a specific asset (e.g., a car loan), then it can be set off proportionately against the value of that asset.
If the loan is for a general purpose or a project (like a power project) unrelated to the car, it cannot be deducted against the car’s value.
Application to Your Case:
The loan taken is for the power project and not for the car.
So, it cannot be set off against the WDV of the car.
Hence, the entire value of the car (Rs. 45 lakhs) will be considered for wealth tax without any deduction for the loan.
Case Law / References:
There isn't a direct, very famous case on this exact fact, but the principle is well-established in wealth tax and income tax jurisprudence:
CIT vs. Shree Meenakshi Mills Ltd. (1990) 184 ITR 170 (SC): It was held that debts should be directly related to the asset for set-off.
CIT vs. Shri Ram Mills Ltd. (1992) 196 ITR 634 (SC): Confirmed that only debts directly related to the assets can be reduced.
Wealth Tax Act, Section 2(ea): Defines ‘debts owed’ as those directly related to the asset.
Summary for management:
You can explain that only loans taken specifically for purchasing or maintaining an asset can be deducted.
General or project loans are not deductible.
Refer them to the above case laws which establish this principle.

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