Deductibility of partner's tax liability on disclosed firm income recognised as a debt owed in wealth-tax computation.

The proportionate share of tax paid by a partner on disclosed income under section 68 of the Finance Act, 1965 was treated as a debt owed for wealth-tax purposes. The liability arose from the firm's voluntary disclosure, and the assessee's share of the tax paid on that disclosure was held deductible in computing net wealth under section 2(m) of the Wealth-tax Act, 1957. The point was treated as settled by an earlier binding decision on the same issue, which recognised the tax liability as an allowable debt on the relevant valuation date.

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Issues: Whether the proportionate share of tax paid by a partner on disclosed income under section 68 of the Finance Act, 1965 was a deductible debt owed under section 2(m) of the Wealth-tax Act, 1957 while computing net wealth on the relevant valuation date.

Analysis: The liability arose from the voluntary disclosure made by the firm and the assessee's proportionate share of the tax paid thereon. The question was treated as concluded by the earlier binding decision on the same point, which held that such tax liability constituted a debt owed and was deductible in computing net wealth.

Conclusion: The amount of tax paid was deductible as a debt owed under section 2(m) of the Wealth-tax Act, 1957, and the question was answered in the affirmative in favour of the assessee.

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