Deductibility of tax on voluntarily disclosed income recognised for net wealth computation despite post-valuation payment

Tax paid on income disclosed voluntarily under section 68 of the Finance Act, 1965 was held deductible in computing net wealth under section 2(m) of the Wealth-tax Act, because the liability was treated as arising on the last day of the relevant financial year even though quantification and payment occurred later. The post-valuation date payment did not prevent the liability from being recognised for wealth-tax purposes, so the deduction was allowed in the assessee's favour.

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Issues: Whether tax paid on the basis of a voluntary disclosure of income under section 68 of the Finance Act, 1965, after the relevant valuation date was deductible in computing net wealth under section 2(m) of the Wealth-tax Act, 1957.

Analysis: The liability to pay tax on the disclosed income was treated as arising at least on the last day of the relevant financial year, even though its quantification and actual payment took place later. The statutory language of section 2(m)(iii) was read as permitting deduction of the tax liability, and the fact that payment was made after the valuation date did not prevent the liability from being taken into account in computing net wealth.

Conclusion: The tax paid on the voluntary disclosure was deductible in computing the assessee's net wealth, and the question was answered in the affirmative in favour of the assessee.

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