Disputed statutory penalty remains a debt for wealth-tax deduction when liability exists on the valuation date.

A statutory penalty imposed under the Foreign Exchange Regulation Act was treated as a debt owed on the relevant valuation dates for wealth-tax purposes. Section 2(m) of the Wealth-tax Act allows deduction of debts owed on the valuation date unless expressly excluded, and the quantified penalty liability was held to exist when imposed. Pending appeal, a High Court stay, and non-payment did not extinguish the debt; they only postponed enforcement. The disputed liability therefore remained an existing obligation and had to be deducted in computing net wealth.

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Issues: Whether a penalty imposed under the Foreign Exchange Regulation Act, though disputed in appeal and stayed on furnishing security, constituted a debt owed by the assessee on the relevant valuation dates for deduction under section 2(m) of the Wealth-tax Act, 1957.

Analysis: The statutory scheme of section 2(m) requires deduction of all debts owed on the valuation date except those falling within the express exclusions. The penalty order created a present liability to pay a quantified sum, and that liability existed on the valuation dates. The subsequent appeal, pendency before the High Court, and stay of recovery did not extinguish the debt; they only postponed enforcement. Non-payment of the amount also did not alter its character as an existing liability. The principle that a disputed statutory liability does not cease to be a debt merely because appellate proceedings are pending was applied.

Conclusion: The penalty amount was a debt owed by the assessee on the relevant valuation dates and had to be deducted in computing net wealth. The assessee succeeded on the issue.

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