Tax liability under voluntary disclosure scheme treated as deductible debt owed for wealth-tax purposes.

Tax paid under section 68 of the Finance Act, 1965, on disclosed concealed income was treated as a deductible debt owed for wealth-tax purposes. The court reasoned that a statutory income-tax liability, once incurred and later quantified, is a present liability and ordinarily ranks as a debt owed under section 2(m) of the Wealth-tax Act, 1957. Although section 68 operated through a special voluntary disclosure mechanism rather than the ordinary charging provisions, the payment was regarded as tax paid in lieu of income-tax and attracted the same wealth-tax treatment. The question was therefore answered in the affirmative in favour of the assessee.

---

---

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

Analysis: The liability to income-tax under the ordinary charging provisions of the income-tax law is a present liability that is quantified later, and such quantified liability is ordinarily deductible as a debt owed. Section 68 of the Finance Act, 1965, was examined in the context of the scheme of voluntary disclosure and the relationship between the special payment mechanism under that provision and the general charging provisions of the income-tax enactments. Although the payment under section 68 was not treated as tax charged under the usual charging sections in the strict sense, it was regarded as tax paid in lieu of such income-tax and therefore as attracting the same treatment for wealth-tax purposes.

Conclusion: The amount of tax paid under section 68 of the Finance Act, 1965, was deductible as a debt owed on the relevant valuation dates; the question was answered in the affirmative in favour of the assessee.

Ratio Decidendi: A statutory tax liability, once incurred and quantified, constitutes a present debt for wealth-tax purposes, and tax paid under a special voluntary disclosure scheme may be treated as deductible where it is paid in lieu of ordinary income-tax liability.

---