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TMI Blog1992 (5) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... ly by the High Court in a reference under section 66 of the Indian Income-tax Act, 1922 (in brief "the Act"), in Vikram Deo Varma, Maharaja of Jeypore v. CIT [1956] 29 ITR 76 (Orissa), and it was held that the income being from agriculture was not exigible to tax. On further appeal to this court at the instance of the Department, the order of the High Court was set aside on October 14, 1958, and the assessee was held liable to pay tax on the forest income. In conformity with the order passed by this court, the Tribunal passed the order under section 66(5) read with section 66A(4) of the Act after June 30, 1964. In pursuance of this order, the Income-tax Officer issued fresh notice of demand on October 4, 1964, and the amount was paid on March 25, 1965. In wealth-tax assessments for the years 1962-63 to 1965-66, the assessee disputed his liability in view of the judgment given by this court in 1958 and claimed that it being a debt within the meaning of clause (m) of section 2 of the Wealth-tax Act, the amount was liable to be deducted while computing his net wealth. The Wealth-tax Officer did not allow the claim as the tax payable remained outstanding for more than twelve months on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than (i) debts which under section 6 are not to be taken into account; (ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act ; and (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 date 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." The net wealth, according to sub-section (m) of section 2, is the aggregate value computed in accordance with the provisions of the Act less the value of all the debts owed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant by this court in 1958, may be in appeal filed by the Department, the appellant's claim that the amount was not payable by him stood finally adjudicated. Nothing more remained to be decided. The order of the Tribunal, in conformity with the order passed by this court, could be relevant for the Department, only to enable it to proceed to realise the amount. It could not stand as a bar to the claim of the appellant under section 2(m) by operation of sub-clause (a) of clause (iii). For the operation of sub-clause (b), the Revenue had to establish that the amount remained outstanding for a period of more than 12 months on the valuation date. In CWT v. Kantilal Manilal [1985] 152 ITR 447 (SC) it was held that an amount becomes outstanding after it had been quantified. The liability under the Income-tax Act arises in the previous year corresponding to the assessment year and it becomes due as held in Kesoram's case [1966] 59 ITR 767 (SC) after it had been "quantified in accordance with ascertainable data". The liability of the assessee was determined by the Income-tax Officer and a demand notice was also served on him. The amount thus became due and payable and, if the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso placed on CWT v. Vadilal Lallubhai [1984] 145 ITR 7 (SC) and it was urged that, in computing the net wealth of an assessee, the deductions admissible must be calculated on the basis of the tax as finally quantified even though the assessment may have been made subsequent to the valuation date. It was urged that, even assuming that the liability arose from the order passed by this court in 1958, it having been finally quantified after the order was passed by the Tribunal, the period of 12 months should be calculated from that date. The facts of the case were entirely different. In Vadilal's case [1984] 145 ITR 7 (SC), the question was whether the deduction could be claimed on the basis of estimated liabilities mentioned in the return or the amount which is finally determined at the final assessment. It was held that it was not possible to accept the claim of the Department that the net wealth for purposes of section 2(m) was the tax liability disclosed by an assessee in his return. What could be deducted was the liability ultimately determined as payable. In the case of the appellant, the quantification had already been done. If the order of this court would have necessitated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctness of the order was challenged by the Department by filing an appeal in this court which was allowed and the liability of the appellant to pay tax was upheld. The tax assessed thus remained unpaid during the pendency of the reference in the High Court, and during the pendency of the appeal in this court and it was paid only in March, 1965. The effect of non-payment of tax under sub-section (7) of section 66 was that the tax payable became outstanding by operation of law and it remained so on the valuation date. Therefore, the bar under sub-clause (b) of clause (iii) of section 2(m) operated and the appellant could not claim the amount as deductible while computing his net wealth. It was outstanding on the valuation dates for more than 12 months whether the period is calculated from service of notice of demand in pursuance of the assessment order or from the final determination of liability by the order passed by this court in 1958 or because of the operation of sub-section (7) of section 66 of the Act. On the facts of this case, it could not be calculated from October, 1964, when the notice of demand was served by the Income-tax Officer in pursuance of the order passed by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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