Voluntary disclosure tax liability counted as debt owed for net wealth computation under the wealth-tax framework.

Income-tax liability arising from a disclosure under section 3(1) of the Voluntary Disclosure of Income and Wealth Act, 1976 was treated as a debt owed for wealth-tax purposes because the liability was regarded as embedded in the concealed income on the valuation date, even though its ascertainment could occur later. The court applied the earlier binding view that such disclosure-linked tax liability is deductible in computing net wealth, following the approach adopted in relation to the Finance Act, 1965 scheme. The liability was therefore deductible in the assessee's net wealth, and the reference was answered in favour of the assessee.

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Issues: Whether the income-tax liability arising from a disclosure made under section 3(1) of the Voluntary Disclosure of Income and Wealth Act, 1976 is deductible as a debt owed in computing net wealth for the relevant valuation date.

Analysis: The liability declared under the voluntary disclosure scheme was held to be embedded in the concealed income on the valuation date, even though the statutory scheme was promulgated later. The nature of the declaration was treated as analogous to the scheme considered under section 68 of the Finance Act, 1965, and the ascertainment of the liability was regarded as capable of being postponed to a later date without affecting its existence on the valuation date. The earlier binding view approving deduction of such tax liability as a debt owed was applied.

Conclusion: The liability was deductible in computing the assessee's net wealth and the answer to the reference was in favour of the assessee and against the Revenue.

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