Tax provision after advance tax deduction qualifies as a debt owed and is deductible in net wealth computation.

A provision made for tax liability after reducing the last instalment of advance tax was treated as a debt owed on the relevant valuation date for purposes of net wealth computation. The Court followed its earlier majority ruling in Assam Oil Co. and declined to reopen the issue, holding that such an estimated tax provision is deductible under section 2(m) of the Wealth-tax Act, 1957. The answer to the referred question was therefore in favour of the assessee and against the revenue.

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Issues: Whether the amount provided by the assessee for its tax liability, after reducing the last instalment of advance tax, constituted a debt owed within the meaning of section 2(m) of the Wealth-tax Act, 1957, on the relevant valuation date and was therefore deductible in computing net wealth.

Analysis: The question was covered by the earlier decision of the Court in Assam Oil Co., where it was held by majority that an estimated provision made in the balance-sheet towards tax liability, after deducting the last instalment of advance tax, amounted to a debt owed on the valuation date and was deductible under section 2(m). The Court followed that binding decision and declined to reopen the issue.

Conclusion: The amount was a debt owed by the assessee on the relevant valuation date and was deductible in the computation of net wealth. The answer to the referred question was in favour of the assessee and against the revenue.

Final Conclusion: The appeal succeeded, the High Court's answer was set aside, and the reference question was answered in favour of the assessee.

Ratio Decidendi: A provision made for tax liability, after deduction of the last instalment of advance tax, constitutes a debt owed on the valuation date for purposes of section 2(m) of the Wealth-tax Act, 1957.

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