Wealth-tax deduction for unpaid income tax on voluntarily disclosed income treated as a present debt owed on valuation dates.

Amounts voluntarily disclosed under section 68 of the Finance Act, 1965 were treated as concealed income chargeable under the income-tax laws, not as a new and independent levy. The unpaid tax on that disclosed income was therefore regarded as income-tax liability referable to the underlying charging provisions and, being a present liability rather than a contingent one, existed on the valuation dates. The court rejected the argument that the liability arose only on disclosure in 1965 and could not affect earlier valuation dates. The tax debt was held deductible as a debt owed under section 2(m) of the Wealth-tax Act, 1957 in computing net wealth.

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Issues: Whether the income-tax liability arising from amounts voluntarily disclosed under section 68 of the Finance Act, 1965, constituted a debt owed under section 2(m) of the Wealth-tax Act, 1957, deductible in computing net wealth on the relevant valuation dates.

Analysis: The amount disclosed under section 68 was treated as concealed income which, in substance, belonged to the class of income chargeable under the Income-tax Acts and not as a wholly new and independent levy. The tax paid under section 68 was therefore regarded as income-tax referable to the underlying charging provisions of the income-tax law, albeit quantified at the concessional rate prescribed by the Finance Act. Applying the principle that tax payable on total income is a present liability and not a merely contingent one, the unpaid tax liability on the disclosed income was held to exist on the valuation dates and to diminish the assessee's wealth. The court rejected the view that the liability arose only upon the 1965 disclosure and therefore could not be taken into account for earlier valuation dates.

Conclusion: The tax liability on the voluntarily disclosed income was a debt owed within section 2(m) of the Wealth-tax Act, 1957, and was deductible in computing the assessee's net wealth.

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