1965 (11) TMI 41 - SUPREME COURT

Whether, on the facts and in the circumstances of the case, the Wealth-tax Officer was justified in taking the value of the assets of the assessee as shown in its balance-sheet on the relevant valuation date ?

Whether, on the facts and in the circumstances of the case, in computing the net wealth of the assessee the amount of proposed dividend was deductible from its total assets ?

Whether, on the facts and in the circumstances of the case, in computing the net wealth of the assessee, the amount of the provision for payment of income-tax and super-tax in respect of the year of account was a debt owed within the meaning of section 2(m) of the Wealth-tax Act, 1957, and as such deductible in computing the net wealth of the assessee ?

Held that:- It was open to the assessee to convince the authorities that the said figure was inflated for acceptable reasons ; but it did not make any such attempt. It was also open to the Wealth-tax Officer to reject the figure given by the assessee and to substitute in its place another figure, if he was, for sufficient reasons, satisfied that the figure given by the assessee was wrong. But he did not find any such reasons to do so. When he accepted the figure shown by the assessee himself, he did the right thing and there is nothing to complain about. The High Court was right in answering the first question in the affirmative.

Till the company in its general body meeting accepts the recommendation and declares the dividend the report of the directors in that regard is only a recommendation which may be withdrawn or modified as the case may be. As on the valuation date nothing further happened than a mere recommendation by the directors as to the amount that might be distributed as dividend, it is not possible to hold that there was any debt owed by the assessee to the shareholders on the valuation date. The High Court rightly answered the second question in the negative.

We agree with the conclusion arrived at by the Gujarat High Court. We, therefore, hold that the liability to pay income-tax is a debt within the meaning of section 2(m) of the Wealth-tax Act and it arises on the valuation date during the accounting year.