Settlement-based tax liability can be deducted in net wealth computation under the Wealth-tax Act.

Tax liability determined pursuant to a settlement was treated as deductible under section 2(m) of the Wealth-tax Act, 1957 while computing net wealth, even though it did not arise directly from the Income-tax Act or the Wealth-tax Act. The High Court applied an earlier binding decision that recognised such settlement-based tax liability as an allowable deduction under section 2(m). On that basis, the Tribunal's approach was found consistent with the settled legal position and was upheld in favour of the assessee.

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Issues: Whether a tax liability determined pursuant to a settlement, though not arising directly from the application of the Income-tax Act, 1961 or the Wealth-tax Act, 1957, is deductible under section 2(m) of the Wealth-tax Act, 1957 while computing net wealth.

Analysis: The issue was covered by an earlier decision holding that tax liability determined as a result of settlement is an allowable deduction under section 2(m) of the Wealth-tax Act, 1957 for the purpose of computing net wealth. Since the Tribunal's view was consistent with that binding position, no error was found in allowing the deduction.

Conclusion: The deduction was held allowable under section 2(m) of the Wealth-tax Act, 1957, and the Tribunal's view was upheld in favour of the assessee.

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