Wealth-tax deduction for income-tax liabilities depends on a prior determination order and the 12-month statutory exception.

Income-tax liabilities for earlier assessment years were treated as deductible in computing net wealth because the statutory exclusion under section 2(m)(iii) applied only to tax liabilities arising from an order under a taxing statute and remaining outstanding for more than 12 months on the valuation date. As no order determining those liabilities had been passed on the relevant valuation date, the amounts did not fall within the exception to deductible debts. The income-tax liabilities were therefore allowed as deductions in the wealth computation, and the departmental appeal failed.

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Issues: Whether income-tax liabilities relating to earlier assessment years were deductible in computing the assessee's net wealth when no order determining those liabilities had been passed on the valuation date.

Analysis: Under section 2(m)(iii) of the Wealth-tax Act, only tax liabilities arising in consequence of an order under a taxing statute and remaining outstanding for more than 12 months on the valuation date are excluded from the debts deductible in computing net wealth. The liabilities claimed by the assessee had not yet been determined by any order on the relevant valuation date, and therefore they did not fall within the statutory exception.

Conclusion: The income-tax liabilities were deductible in the computation of net wealth and the departmental appeal failed.

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