Subsisting debt and enforceable claim test prevented alleged director-diverted funds from being treated as company assets for wealth-tax purposes.

A sum allegedly taken and used by directors could not be included in the company's net wealth because it had never been entered in the books, no part remained in the company's possession, and there was no loan or subsisting debt due from the directors to the company. The claim was also time-barred by the relevant valuation dates, so it was not an enforceable asset. On that basis, deletion of the amount from the wealth-tax assessment was upheld in favour of the assessee.

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Issues: Whether the sum representing concealed income allegedly taken and utilised by the directors could, on the relevant valuation dates, be treated as an asset of the assessee-company liable to be included in its net wealth.

Analysis: The concealed income had arisen in earlier assessment years and had been settled under the Indian Income-tax Act, 1922. On the material before it, the amount was never brought into the company's books, no part of it remained in the company's coffers, and the directors had already utilised it. The company had not advanced the money as a loan to the directors, so the amounts could not be characterised as debts owed to the company. Even otherwise, any such claim had become time-barred long before the valuation dates. On that basis, the amount could not represent an asset of the company for wealth-tax purposes.

Conclusion: The deletion of the amount from the wealth-tax assessment was justified and the question was answered in favour of the assessee.

Ratio Decidendi: A sum unlawfully taken and utilised by directors, which is neither a subsisting debt nor an enforceable claim on the valuation date, cannot be treated as an asset of the company for inclusion in net wealth.

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