Voluntary disclosure tax liability counts as a debt owed for wealth-tax purposes when enforceable on the valuation date.

Tax liability on income voluntarily disclosed under the Voluntary Disclosure of Income and Wealth Ordinance, 1975 was treated as a debt owed on the valuation date for wealth-tax purposes because the disclosed income remained chargeable under the income-tax law and had escaped assessment. The later filing of the declaration did not defeat deductibility where the liability existed on the relevant date. Following the binding Kerala High Court view, the Tribunal allowed the deduction in computing net wealth and distinguished the contrary Gujarat High Court view.

---

---

Issues: Whether the income-tax and wealth-tax payable on income voluntarily disclosed under the Voluntary Disclosure of Income and Wealth Ordinance, 1975 constituted a deductible debt owed on the relevant valuation date for the purpose of computing net wealth under the Wealth-tax Act, 1957.

Analysis: The disclosure under the Ordinance related to income that was chargeable to tax under the Income-tax Act but had escaped assessment. The liability to tax was therefore a liability under the income-tax law and, applying the principle that tax liability can constitute a debt owed on the valuation date, it was not material that the declaration was filed after the valuation date. The Tribunal followed the binding Kerala High Court view that such liability is deductible in computing net wealth, and distinguished the contrary view taken by the Gujarat High Court.

Conclusion: The liability in respect of the voluntarily disclosed income was deductible as a debt owed on the valuation date, and the assessee was entitled to the claimed deduction.

Final Conclusion: The assessment had to be modified by allowing the deduction of the tax liability attributable to the voluntarily disclosed income, and the appeal succeeded.

Ratio Decidendi: A tax liability arising from voluntarily disclosed income is a debt owed for wealth-tax purposes if, on the valuation date, it represents an enforceable liability under the income-tax law, even though the disclosure declaration is made later.

---