TaxTMI 
TaxTMI 
1985 (3) TMI 235
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.... respect of liabilities arising under the wealth-tax assessments of the assessee for the assessment years 1960-61 and 1961-62 ? " For the purpose of determining the assessee's net wealth in the assessment proceedings under the W.T. Act in respect of the assessment years 1961-62 and 1962-63, the corresponding valuation dates being March 31, 1961, and March 31, 1962, the assessee claimed a deduction of certain sums representing the estimated liabilities on account of income-tax and wealth-tax. The claim was rejected by the WTO in both assessments. On appeal by the assessee, the AAC of Wealth-tax allowed a part of the claim. In the appeal pertaining to the assessment year 1961-62, he allowed deduction of Rs. 22,679 on account of wealth-tax re....
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....ng Wealth-tax Reference No. 20 of 1970, was made to the Gujarat High Court for its opinion on the question of law set forth earlier. It may be mentioned that another question was also framed in that reference, and that this reference along with several other references were disposed of together by the Gujarat High Court by its judgment in CWT v. Kantilal Manilal [1973] 88 ITR 125. Against that judgment, corresponding special leave petitions were filed by the Revenue in this court, but all the special leave petitions, except Special Leave Petitions (Civil) Nos. 505 and 506 of 1973, arising out of Wealth-tax Reference No. 20 of 1970, were dismissed on the merits, and in respect of these two special leave petitions the grant of special leave ....
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....is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than-... (iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958), (a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him; or (b) which, although not claimed by the assessee as not being payable by him, is nevertheless outstanding for a period of more than twelve months on the valuation date. " In the pr....
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....962-63, the deduction claimed relates to the wealth-tax liability of Rs. 39,692 for the assessment year 1961-62. The assessment order was made on March 23, 1962, but the notice of demand was served on April II, 1962, a few days after the relevant valuation date, March 31, 1962. Therefore, the notice of demand in each case was served after the valuation date had passed. There was no demand already subsisting on the respective valuation dates. In order to invoke s. 2(m)(iii)(a), the Revenue must establish that an amount of tax was outstanding on the valuation date. An amount of the tax is outstanding if it is payable and has remained unpaid, in other words, if there is a debt due and there has been no payment of the debt. In case under the I....
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....and should have been made by the assessing authority. It seems to us that s. 2(m)(iii)(a) comes into play only after demand for payment of tax has been made. The clause, read in its entirety, speaks of a debt owed by the assessee represented by an amount of tax " payable in consequence of any order " passed under the relevant taxing statute " outstanding on the valuation date ". The expression " debt owed " has been held by this court in Kesoram Industries & Cotton Mills Ltd. v. CIT [1966] 59 ITR 767, to mean a debt which the assessee is under an obligation to pay and, therefore, it includes both a liability to pay in praesenti as well as a liability to pay in futuro an ascertainable sum of money. Both kinds of liabilities are included with....
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.... In the present case, the appeal against the wealth-tax assessment order for the assessment year 1960-61 was filed on May 9, 1961, and the appeal against the wealth-tax assessment order for the assessment year 1961-62 was filed on May 9, 1962. Both the appeals were filed, therefore, after the respective valuation dates, March 31, 1961, and March 31, 1962, corresponding to the assessment years 1961-62 and 1962-63 under reference. But for s. 2(m)(iii) an amount of a tax outstanding on the valuation date would constitute, a debt owed by the assessee on the valuation date, and the assessee would be entitled to claim its deduction in the process of computing his net wealth. Parliament, however, intended that if the amount of the tax was challeng....