Statutory tax demand as debt owed on valuation date, with later reduction rights not making it contingent.

Arrears of tax demanded under section 18A of the Indian Income-tax Act, 1922 were treated as an ascertained statutory liability that was presently enforceable on the valuation date. The fact that the assessee could later substitute a lower estimate, or otherwise reduce the amount, did not make the liability contingent. The statutory scheme for demand, default consequences, and credit showed that the amount specified in the demand notice remained payable unless validly altered under the Act. On that basis, the arrears constituted a debt owed within section 2(m) of the Wealth-tax Act, 1957 and were deductible in computing net wealth.

---

---

Issues: Whether arrears of tax payable under section 18A of the Indian Income-tax Act, 1922, constituted a debt owed by the assessee on the valuation date within section 2(m) of the Wealth-tax Act, 1957, so as to be deductible in computing net wealth.

Analysis: The liability under section 18A(1) arose on the making of the order and service of the demand notice, and the amount specified therein remained payable unless the assessee substituted a lower estimate under section 18A(2). The possibility of reduction or extinction of the liability by a later act of the assessee did not make the existing liability contingent. The statutory scheme, including default consequences under section 18A(10) and credit under section 18A(11), showed that the amount demanded was an ascertained statutory liability and not a mere inchoate obligation.

Conclusion: The arrears demanded under section 18A were debts owed on the valuation date and were deductible under section 2(m) of the Wealth-tax Act, 1957; the answer was therefore in favour of the assessee.

Ratio Decidendi: A statutory tax demand that is presently enforceable and ascertainable is a debt owed on the valuation date, and a subsequent possibility of reduction by the assessee does not convert it into a contingent liability.

---