Wealth-tax valuation of partnership interest: section 2(m) held inapplicable, and firm's income-tax liability deductible.

Section 2(m) of the Wealth-tax Act, 1957 was held inapplicable to the computation of an assessee's interest in a partnership firm's wealth. Applying its earlier ruling on the same issue, the Court also held that the firm's outstanding income-tax liability had to be deducted while arriving at the firm's net wealth for valuing the assessee's share. The legal effect was that the liability remained an allowable deduction in the wealth computation, and the issue was answered in favour of the assessee.

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Issues: Whether section 2(m) of the Wealth-tax Act, 1957 applied in determining the assessee's share in the wealth of a firm, and whether the firm's outstanding income-tax liability had to be deducted while computing its net wealth for the purpose of valuing the assessee's interest.

Analysis: The Court followed its earlier decision on the same legal question and held that section 2(m) was not applicable to the computation of the assessee's interest in the partnership firm. On that basis, the firm's outstanding income-tax liability, though old, was required to be deducted in arriving at the firm's net wealth for the assessee's share.

Conclusion: Section 2(m) of the Wealth-tax Act, 1957 did not apply, and the income-tax liability of the firm was deductible; the question was answered in the negative, in favour of the assessee.

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