Wealth-tax deduction for tax on concealed income held available where the liability existed on the valuation date.

Tax liability on concealed income arose when the income was earned, and voluntary disclosure did not extinguish that existing obligation. Although the amount paid under section 68 of the Finance Act, 1965 was not taxed under the normal charging provisions, it was treated as income-tax paid in lieu of the ordinary charge and therefore stood on the same footing for wealth-tax purposes. As the liability existed on the relevant valuation dates, the amount was deductible as a debt owed under section 2(m) of the Wealth-tax Act, 1957.

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Issues: Whether tax paid under section 68 of the Finance Act, 1965, on voluntarily disclosed concealed income constituted a "debt owed" on the relevant valuation dates within section 2(m) of the Wealth-tax Act, 1957, so as to be deductible in computing net wealth.

Analysis: The liability to income-tax on concealed income arose when the income was earned and was not eliminated merely because the income was later disclosed under the voluntary disclosure scheme. Although the court did not treat the amount paid under section 68 as tax charged under section 3 of the Indian Income-tax Act, 1922, or section 4 of the Income-tax Act, 1961, it held that the payment represented income-tax paid in lieu of the ordinary charge and therefore stood on the same footing for wealth-tax purposes. The amount was already an existing liability on the relevant valuation dates and was deductible in computing net wealth.

Conclusion: The tax paid under section 68 of the Finance Act, 1965, was allowable as a debt owed under section 2(m) of the Wealth-tax Act, 1957, and the question was answered in favour of the assessee.

Ratio Decidendi: A liability to pay income-tax on income already earned is a present debt for wealth-tax purposes, and tax paid under a statutory voluntary disclosure scheme, though not levied under the normal charging section, is deductible where it represents tax in lieu of the ordinary income-tax liability.

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