Present tax liability under a voluntary disclosure scheme qualifies as a debt owed and is deductible in net wealth computation.

Tax liability arising under the voluntary disclosure scheme in section 68 of the Finance Act, 1965 was treated as a present and ascertainable debt on the valuation date, not a contingent liability. On that basis, the liability was held to fall within "debt owed" under section 2(m) of the Wealth-tax Act, 1957, because the charging provisions created an existing obligation even though quantification or payment occurred later. The Court rejected the argument that the disclosure tax was an ad hoc charge outside the income-tax charging framework. The tax payable under section 68(3) was therefore deductible in computing net wealth, and the assessee succeeded.

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Issues: Whether the tax liability arising under the voluntary disclosure scheme in section 68 of the Finance Act, 1965, was a debt owed on the valuation date and deductible in computing net wealth under the Wealth-tax Act, 1957.

Analysis: The charging provisions of the wealth-tax and income-tax laws were treated as creating a present liability to pay an ascertainable sum, even if quantification or payment followed later. Applying that principle, the Court held that the liability to pay tax on amounts voluntarily disclosed under section 68 of the Finance Act, 1965, was not a contingent liability but a present debt existing on the relevant valuation date. The Court rejected the view that the disclosure tax created a new ad hoc charge outside the income-tax charging provisions and followed the majority line of authority that such liability falls within the expression 'debt owed' in section 2(m) of the Wealth-tax Act, 1957.

Conclusion: The tax payable under section 68(3) of the Finance Act, 1965, was deductible in computing net wealth and the assessee succeeded.

Ratio Decidendi: A statutory tax liability that is present and ascertainable on the valuation date, though payable later, constitutes a 'debt owed' for purposes of section 2(m) of the Wealth-tax Act, 1957.

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