Debt owed on valuation date remained deductible in net wealth computation despite deemed dividend treatment under income tax law.

A loan liability treated as deemed dividend under the Income-tax Act remained a debt owed on the valuation date for wealth-tax purposes, because deductibility under section 2(m) of the Wealth-tax Act depends only on whether the liability falls within the statutory exclusions. As the amount was an existing debt and did not come within sub-clauses (i) to (iii), it was deductible in computing net wealth.

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Issues: Whether a loan liability shown as deemed dividend under the Income-tax Act, 1961 was deductible as a debt owed on the valuation date while computing net wealth under section 2(m) of the Wealth-tax Act, 1957.

Analysis: Section 2(m) defines net wealth as the excess of assets over debts owed on the valuation date, subject only to the exclusions specified in sub-clauses (i), (ii) and (iii). The amount in question represented a debt owed by the assessee on the valuation date and did not fall within any of the excluded categories. Its treatment as deemed dividend under section 2(22) of the Income-tax Act, 1961 was irrelevant to the allowance of deduction under the Wealth-tax Act, because deductibility had to be determined solely with reference to section 2(m).

Conclusion: The amount was a deductible debt under section 2(m) of the Wealth-tax Act, 1957 and had to be allowed in computing net wealth.

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