Outstanding disputed liabilities remain deductible in net wealth if they subsist on the valuation date despite appeal or stay.

A quantified liability remains a debt owed for wealth-tax purposes if it is outstanding on the valuation date, even where an appeal is pending or a stay has been sought, unless the statute expressly excludes deduction. On that basis, disputed sales-tax dues continued to be deductible because the underlying statutory liability had been determined and was still enforceable. The same approach applied to a penalty under foreign exchange law: although challenged and stayed, it remained a subsisting liability and a deductible debt in computing net wealth. The stated ratio is that pendency of proceedings does not extinguish an existing liability for wealth-tax purposes.

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Issues: (i) whether sales-tax liabilities disputed in appeal could be allowed as a deduction in computing net wealth; (ii) whether penalty levied for violation of foreign exchange regulations, though under challenge and stayed, constituted a debt owed and was deductible in computing net wealth.

Issue (i): whether sales-tax liabilities disputed in appeal could be allowed as a deduction in computing net wealth.

Analysis: The liability to sales tax had been determined by the taxing authority and the mere pendency of appeal did not efface the statutory liability. The rule applied was that an existing liability does not cease to be a debt merely because it is under challenge, and the fact that no stay had been obtained supported its continued existence as an enforceable obligation.

Conclusion: The sales-tax liability was deductible in computing net wealth and the allowance was correct.

Issue (ii): whether penalty levied for violation of foreign exchange regulations, though under challenge and stayed, constituted a debt owed and was deductible in computing net wealth.

Analysis: The penalty had been levied under the foreign exchange law and had not ceased to exist merely because appeals were pending. Penalties imposed under another enactment, if they are subsisting and outstanding on the valuation date, are debts owed for wealth-tax purposes, and the bar applicable to income-tax or wealth-tax penalties under those enactments did not govern such a liability under the foreign exchange law.

Conclusion: The foreign exchange penalty was a deductible debt in computing net wealth and the allowance was correct.

Final Conclusion: No referable question of law arose from the Tribunal's order, so the reference petitions were dismissed, leaving the allowance of both liabilities undisturbed.

Ratio Decidendi: A liability that has been validly quantified and remains outstanding on the valuation date is a debt owed for wealth-tax purposes even if it is under appeal or stay, unless the statute expressly excludes its deduction.

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