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Issues:
1. Deductibility of provision for purchase tax liability in the computation of profits and net wealth. 2. Whether the liability for purchase tax is an accrued liability. 3. Interpretation of "debt owed" under the Wealth-tax Act. 4. Distinction between income-tax liability and sales tax liability. 5. Applicability of previous court decisions on similar tax liabilities. Analysis: 1. The judgment dealt with petitions under section 27(3) of the Wealth-tax Act, 1957, regarding the deductibility of a provision made by a firm for purchase tax liability. The firm, engaged in exporting marine products, made provisions in its accounts for potential purchase tax liability. The court held in an earlier judgment that the provision was deductible as business expenditure under section 37(1) of the Income-tax Act. The partners of the firm claimed that their shares of the liability provision should be deductible in computing their net wealth for wealth-tax assessment. The Tribunal upheld this contention, concluding that the provision for purchase tax liability was deductible in computing the net wealth of the partners. 2. The court analyzed whether the liability for purchase tax was an accrued liability. It referred to previous judgments and held that the liability for sales or purchase tax accrues at the moment of sales or purchases, making it a present liability. The court emphasized that the liability becomes due by the end of the year, making it an existing liability rather than a contingent one dependent on assessment and demand. The court rejected the Revenue's argument that the liability was contingent until assessment and demand were made. 3. The court interpreted the term "debt owed" under the Wealth-tax Act, citing a Supreme Court decision that held income tax liability as a present liability and deductible in computing net wealth. The court applied this interpretation to the liability for purchase tax, stating that the provision made for purchase tax was a debt owed within the meaning of the Act. The court rejected the Revenue's attempt to distinguish income tax liability from sales tax liability. 4. The court addressed the Revenue's argument that sales tax liability could not be treated as an accrued liability. It distinguished cases related to super tax and additional super tax liabilities, emphasizing that the liability for purchase tax accrues at the time of sales or purchases. The court held that the liability for purchase tax is an accrued liability, similar to income tax liability, and should be treated as a debt owed by the assessees. 5. The court considered previous decisions of the Madras High Court and the Bombay High Court related to super tax liabilities. It distinguished these cases from the present matter concerning purchase tax liability, emphasizing that the liability for purchase tax accrues at the time of sales or purchases. The court relied on its earlier judgment and held that the provision for purchase tax was an accrued liability, rejecting the need for further reference of legal questions. In conclusion, the court dismissed the petitions, affirming that the provision for purchase tax liability was deductible in the computation of profits and net wealth, as it constituted an accrued liability for the partners of the firm. The court's decision was based on the interpretation of "debt owed" under the Wealth-tax Act and the nature of the liability for purchase tax as an existing, present liability.
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