Debt owed versus debt due: certain payable liabilities count, while contingent liabilities do not in capital computation.

For Rule 19(3) and section 80J capital computation, the expression "debt owed" was construed consistently with the Supreme Court's settled interpretation under the Wealth-tax Act. The controlling principle was that a debt exists if it is certainly payable in all events, even if not presently due for payment; only contingent liabilities fall outside the concept. On that basis, no separate distinction was accepted between "debts owed" and "debts due" for excluding amounts from capital, and the proposed reference was declined.

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Issues: Whether, for the purpose of Rule 19(3) and section 80J relief, a distinction is to be drawn between debts owed and debts due so that only debts actually due for payment at the end of the accounting period are excluded while computing capital.

Analysis: The settled meaning of the expression "debt owed" had already been explained by the Supreme Court while construing section 2(m) of the Wealth-tax Act. The approved distinction is between a debt owing and a debt due, but the existence of a debt does not depend on whether the amount is presently payable or payable in future, so long as it is certainly and in all events payable and not contingent. In view of that binding exposition, the same construction governed the expression used for computing capital under Rule 19(3), and no separate question of law survived for reference.

Conclusion: The proposed distinction between "debts owed" and "debts due" was rejected, and the revenue's request for reference was declined.

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