Purchase tax liability accrued on taxable purchases and qualified as a debt owed for net wealth computation.

A provision made for purchase tax liability was treated as deductible in computing a partner's net wealth because the liability accrued when the taxable purchases were made and was an existing obligation, not a contingent one. Applying the meaning of "net wealth" and "debt owed" under section 2(m) of the Wealth-tax Act, the court held that a crystallised liability payable in praesenti qualifies for deduction. Authorities dealing with advance tax and income-tax were distinguished because purchase tax arose from the underlying purchases themselves, not from an assessment-dependent regime. The reference applications were declined.

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Issues: Whether the proportionate provision made for purchase tax liability was deductible as a "debt owed" in computing the net wealth of the partners under the Wealth-tax Act.

Analysis: The liability for purchase tax was treated as accruing when the purchases were effected, and the provision made against such liability was held to represent an existing obligation rather than a contingent one. The Court relied on the meaning of "net wealth" under section 2(m) of the Wealth-tax Act and applied the principle that a liability which has crystallised and is payable in praesenti qualifies as a debt owed. The decisions dealing with advance tax and income-tax liability were distinguished on the basis that purchase tax liability arose from the taxable purchases themselves and not from an assessment-dependent super-tax regime.

Conclusion: The proportionate amount of the provision for purchase tax was deductible as a debt owed, and the reference applications were declined.

Ratio Decidendi: A liability for purchase tax accrues when the taxable purchases are made, and a provision made against that accrued liability is a debt owed within the meaning of section 2(m) of the Wealth-tax Act, 1957.

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