Break-up value of unquoted shares: unprovided tax liability was not deductible where other assets and reserves covered it.

For unquoted shares valued on a break-up basis under wealth-tax law, an estimated tax liability not provided for in the balance-sheet was not deductible where the Tribunal found that the liability was fully covered by other assets and reserves and that finding was not challenged. The earlier interpretation of "debt owed" did not require automatic deduction of every tax liability; it treated only a definite sum payable as a debt. On those facts, the estimated liability was not excluded from asset value, and the issue was answered against the assessee and in favour of the Revenue.

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Issues: Whether, in determining the break-up value of shares for wealth-tax purposes, the estimated tax liability of the company not provided for in its balance-sheet had to be deducted from the value of the company's assets.

Analysis: The relevant valuation was for unquoted shares, so their value had to be worked out on the basis of the company's assets and liabilities. The question whether an unprovided tax liability was deductible had to be answered in the light of the Tribunal's factual finding that the alleged tax liability was covered by other assets and reserves not reflected in the balance-sheet and that no challenge had been made to that finding. The earlier decision on the meaning of "debt owed" under the Wealth-tax Act did not require deduction in every case where a tax liability existed; it only treated as debt a liability to pay a definite sum, and the present factual finding meant that the liability was fully covered by other assets.

Conclusion: The estimated tax liability was not required to be deducted in the facts of the case, and the question was answered against the assessee and in favour of the Revenue.

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