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Issues Involved:
1. Allowance of sales-tax liabilities. 2. Allowance of foreign exchange penalty. Detailed Analysis: 1. Allowance of Sales-Tax Liabilities: The appellant claimed a deduction of Rs. 92,000 for sales-tax liabilities for the assessment years 1969-70 to 1977-78. The Wealth-tax Officer (WTO) denied the deduction because the sales-tax arrears were under appeal, and the appellant had never engaged in sales warranting sales-tax payment. Additionally, the appellant failed to provide details or demand notices for these liabilities. The Appellate Assistant Commissioner (AAC) noted that the Tamil Nadu Sales-tax authorities had proceeded against several firms where the appellant was a partner for the alleged first sale of imported art silk yarn. The firms contested the sales-tax imposition but were unsuccessful, and the Tribunal upheld the tax, leading the firms to appeal to the High Court of Madras without obtaining a stay. The partners paid the sales-taxes in installments, and the total payable amount was claimed as a current liability in their wealth returns. The AAC concluded that the liability persisted despite the appeal, referencing the Supreme Court decision in Kedarnath Jute Mfg. Co. Ltd. v. CIT, which stated that an appeal does not negate the statutory liability. The Tribunal agreed, affirming that the sales-tax liability existed and was correctly allowed as a deduction in computing the assessee's wealth. 2. Allowance of Foreign Exchange Penalty: The appellant also claimed a deduction of Rs. 2,20,000 for foreign exchange penalties for the same assessment years. The WTO denied this deduction as well, noting that the penalty was under appeal and the appellant had not provided full details. The AAC detailed that the Directorate of Enforcement had levied penalties totaling Rs. 20.10 lakhs on several firms for violating the Foreign Exchange Regulation Act, 1947. These firms, represented by their partners, appealed to the High Court of Madras and obtained a stay by offering properties as security. Despite the firms' dissolution, the partners, including the appellant, claimed the penalty as a liability in their wealth returns. The High Court upheld the penalty's legality, and the partners sought leave to appeal to the Supreme Court. The AAC found that the penalty remained a subsisting liability eligible for deduction. The Tribunal concurred, noting that penalties for legal infractions, if debts to the State, are allowable in computing an assessee's wealth. The Tribunal differentiated the treatment of such penalties under the Wealth-tax Act from the Income-tax Act, allowing the penalty as a debt owed by the assessee on the valuation dates, thus deductible in computing wealth. Conclusion: The Tribunal dismissed the Department's appeals, agreeing with the AAC that both the sales-tax liabilities and the foreign exchange penalties should be allowed as liabilities and deducted from the net wealth. The Tribunal applied the Supreme Court's ruling, concluding no question of law arose for reference to the High Court, and affirmed the penalties as debts owed by the assessee, deductible in computing wealth. The High Court dismissed the petitions, affirming no referable question of law existed, and awarded costs to the respondents.
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