Contingent super-tax provision is not deductible in valuing shares for wealth-tax when liability has not crystallised.

A provision for possible liability under section 23A super-tax was not deductible in computing the break-up value of shares for wealth-tax purposes. The liability had not crystallised on the valuation date because no order had been passed by the Income-tax Officer, so it remained a contingent and not an existing enforceable debt. A claimed exception based on the companies' balance-sheets and assessment position was rejected because the necessary specific facts were not on record. The valuation had therefore to proceed without deducting the proposed super-tax provision.

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Issues: Whether a provision made in the balance-sheet for possible liability under section 23A super-tax could be deducted while computing the break-up value of shares for wealth-tax purposes.

Analysis: The liability to additional super-tax under the relevant provision does not arise automatically; it ripens only when an order is passed by the Income-tax Officer after consideration of the necessary factual conditions. On the valuation date, no such order had been made in respect of either company. The alleged liability was therefore only a possible and contingent liability, not an existing debt capable of deduction in valuing the shares. The contention that a special exception could be made on the basis of the companies' balance-sheets or assessment stands was not accepted because the necessary specific case and supporting facts were not on record.

Conclusion: The provision for possible section 23A super-tax was not deductible in computing the break-up value of the shares, and the question was answered against the assessee.

Ratio Decidendi: For wealth-tax valuation of shares on the relevant date, a liability that has not crystallised into an existing enforceable obligation cannot be treated as a deductible debt merely because a provision has been made in the company's accounts.

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