1998 (12) TMI 7 - SC - Income Tax

In the present case the liability of the respondent to Lucas (England) is to issue to Lucas (England) equity shares of a value equivalent to the amount advanced by Lucas (England) for the plant and machinery. It is only if for any-reason the shares cannot be allotted that the question of compensating Lucas (England) in cash might arise - hence it can not be said that there was a debt owed by the respondent to Lucas to be taken into account for the purposes of computing the capital u/s 801

Summary

The Supreme Court dismissed the appeal regarding the issue of whether an agreement created a debt towards the supply of plant and machinery, ruling that a liability depending on a contingency is not a debt until the contingency has occurred. The liability of the respondent to issue equity shares to Lucas (England) did not constitute a debt owed for the purposes of computing capital under section 80J of the Income-tax Act.