9911796707
TMI Blog1963 (2) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... has made provisions for taxation amounting to ₹ 2,25,000, ₹ 2,40,000 and ₹ 2,90,933.84 np. in respect of the calendar years 1956, 1957, and 1958 respectively. These amounts are shown in the balance-sheet as provisions for taxation under the head current liabilities and provisions . The Wealth-tax Officer did not exclude these amounts from the net wealth of the company. The order of the Wealth-tax Officer was affirmed by the Appellate Assistant Commissioner. On appeal the Tribunal took the view that the liabilities for taxation were deductible from the assets of the company for determination of its net wealth and relied upon an earlier decision of the Full Bench of the Tribunal. Dissatisfied with the order of the Tribunal an application was made by the department for reference to this court. The relevant provisions of the Act are set out below. Section 2(m) defines the net wealth as follows: net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarded as a debt within the meaning of section 2(m) of the Act, in finding out the value of the assets, the amount of tax set apart in the balance-sheet should be taken into consideration and as no net wealth can be determined without ascertaining the value of the assets, this court can within the scope of the question referred decide whether for the purposes of determining the value of the assets the amount set apart in the balance-sheet for the payment of the tax should or should not be taken into consideration. He relies upon section 7(1) which has already been set out, and argues that the Wealth-tax Officer instead of determining separately the value of each asset held by the assessee when the assessee is a business company can take the balance-sheet into consideration in determining the net value of the assets of the business. But this sub-section does not lay down that all items of the liability set out in the balance-sheet are bound to be deducted by the Wealth-tax Officer in determining the assets of the company. The liabilities which are likely to affect the value of the assets may be taken into consideration. But every amount which is set apart in the balance-sheet for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been ex hypothesi fixed by section 3 of the Income-tax Act. The counsel for the department even went so far as to suggest that the liability cannot be deducted unless the amount of liability is actually paid. If the amount is actually paid the question of deducting the amount would not arise. By actual payment the value of the assets has already been reduced and thus the question will only arise where the liability exists and it has not been discharged, but the amount has been set apart for the discharge of the liability. It cannot, therefore, be said that the liability to pay income-tax is a contingent liability depending upon the assessment order being made. The contingent liability will be one which will arise on the happening of a certain event. If the liability to pay tax arises when the income is made and does not depend upon the passing of an order of assessment, it cannot be said to be a contingent liability. When the money was set apart for the discharge of the tax liability, the liability was in existence and it could not be argued that it will come into existence only after the assessment order has been passed. The next contention is that even though the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wealth- tax Act, 1957, in clause (m) after sub-clause (ii) the following sub- clause shall be inserted, namely: (iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958),-- (a) which is outstanding on the valuation data and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him, or (b) which, although not claimed by the assessee as not being payable, by him, is nevertheless outstanding for a period of more than twelve months on the valuation date. In our opinion this sub-clause which has been given retrospective effect only lays down that certain outstanding tax payable in consequence of any order passed under or in pursuance of the Income-tax Act will not be deductible if the assessee has in appeal, revision or otherwise claimed that he is not liable to pay that tax. Secondly, even if he has not claimed in appeal or revision, the amount will not be deductible if it has remained unpai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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