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Issues:
1. Deduction of penalty amount as debt owned by the assessee for assessment years 1976-77 and 1977-78. Analysis: The judgment pertains to two appeals by the assessee concerning the assessment years 1976-77 and 1977-78. The Director, Enforcement Directorate imposed a penalty of Rs. 5,00,000 on the assessee under the Foreign Exchange Regulation Act, which the assessee disputed and appealed to the High Court. The assessee claimed deduction of the penalty amount as debt owned on the relevant valuation dates. However, the WTO and the AAC disallowed the claim, stating that since the penalty was under dispute and not paid, it did not constitute a liability. The AAC held that the liability would arise when it becomes final. The ITAT analyzed the provisions of the Wealth Tax Act and concluded that the penalty amount represented a debt owned by the assessee on the relevant valuation dates. The ITAT emphasized that the liability to pay the penalty amount arose when it was imposed by the Enforcement Directorate, and the subsequent confirmation of the order by the Appellate Board solidified the debt owed by the assessee. The fact that the assessee had not paid the amount or obtained a stay order did not negate the existence of the debt. The ITAT rejected the argument that the liability was contingent due to the pending appeal, citing a Supreme Court decision that disputed liabilities remain liabilities until finally resolved. The ITAT distinguished previous judgments cited by the department, emphasizing that the penalty amount qualified as a debt owed by the assessee on the relevant valuation dates. Ultimately, the ITAT allowed the appeals, directing the WTO to treat the penalty amount as debt owned by the assessee on the valuation dates and allow deduction for calculating the net wealth. The judgment highlights the distinction between disputed liabilities and contingent liabilities, affirming that statutory liabilities remain debts even if under dispute or subject to appeal.
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