Voluntary disclosure tax liability treated as an existing debt for wealth-tax computation on the valuation date.

Liability to income-tax and wealth-tax arising from voluntary disclosure of concealed income was treated as an existing obligation referable to the years in which the income accrued, even though its ascertainment occurred later under the disclosure scheme. The scheme was viewed as a mechanism for liquidating a pre-existing tax liability, not creating a fresh charge. On that basis, the disclosure-related tax demand was held to be a debt owed on the relevant valuation date and therefore admissible as a deduction in computing net wealth. The reference was answered in the assessee's favour.

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Issues: Whether income-tax and wealth-tax liability arising from voluntary disclosure of concealed income and wealth, made after the valuation date under the voluntary disclosure scheme, is an admissible deduction in computing net wealth as a debt owed on the relevant valuation date.

Analysis: The liability to tax on concealed income disclosed under the voluntary disclosure scheme was treated as embedded in the taxable asset on the valuation date, though its ascertainment was postponed to a later date. The scheme was regarded as a method for liquidation of an already existing income-tax liability and not as creating a new charge. The legal effect of the voluntary disclosure was held not to alter the character of the underlying tax liability, which related back to the years in which the concealed income had accrued and would otherwise have been taxable in the ordinary course. On that basis, tax liability on the disclosed income was regarded as a debt owed within the meaning of the Wealth-tax Act.

Conclusion: The liability to pay tax on the income voluntarily disclosed was deductible as a debt owed on the valuation date, and the answer to the reference was in the affirmative in favour of the assessee.

Final Conclusion: The disclosure-related tax liability was held to be a deductible liability in wealth-tax computation because it represented an existing obligation referable to the relevant valuation date.

Ratio Decidendi: Liability to income-tax on concealed income disclosed under a voluntary disclosure scheme is a debt owed on the valuation date for wealth-tax purposes where the disclosure relates to earlier concealed income that would otherwise have been taxable in the ordinary course.

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