1983 (10) TMI 2 - SC - Wealth-tax

Whether in computing the net wealth of the assessee, the amount deductible in respect of liability of tax for any year for which the assessment is completed after the valuation date is the liability as ascertainable on the valuation date or the actual amount of tax subsequently assessed - Held, yes - revenue s appeal is dismissed

Summary

Issues:
- Interpretation of wealth-tax law regarding the deduction of tax liabilities for assessment year
- Whether tax liability should be based on returns filed by assessee or final assessment

Analysis:
The Supreme Court judgment involved appeals against the Gujarat High Court's decision on wealth-tax references. The main issue was whether the deduction for tax liabilities in computing net wealth should be based on the amount ascertainable on the valuation date or the actual amount subsequently assessed. The High Court held that deductions should be based on the tax as finally determined on assessment, not on returns filed by the assessee. The Revenue contended that the High Court erred in its interpretation of the law. The Court noted that income-tax, wealth-tax, and gift-tax liabilities become crystallized debts on specific dates, and the assessment process aims to quantify the precise tax liability. The assessment order specifies the assessed income or wealth, and the corresponding tax liability is computed. The Court emphasized that the final quantification of tax liability must be considered for deductions in wealth-tax assessment, even if determined after the valuation date. The Court concluded that the High Court was correct in holding that deductions should be based on the tax as finally quantified on assessment, as the assessment order supersedes the data in the assessee's return.

In summary, the Supreme Court clarified the interpretation of wealth-tax law regarding the deduction of tax liabilities in computing net wealth. The Court emphasized that tax liabilities become crystallized debts on specific dates and that the assessment process aims to determine the precise tax liability. The Court ruled that deductions should be based on the tax as finally quantified on assessment, even if determined after the valuation date, as the assessment order supersedes the data in the assessee's return. The appeals were dismissed, upholding the High Court's decision, and costs were awarded to the respondent.