9911796707
TMI Blog1970 (4) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ence raises the following three questions for our opinion : " 1. Whether, on the facts and in the circumstances of the case, the amount of Rs. 1,01,994, being provision for payment of income-tax and super-tax in respect of assessments not contemplated on the valuation date, was deductible in computing the net wealth of the assessee ? 2. Whether, on the facts and in the circumstances of the case, the provision for proposed dividend of Rs. 1,53,400 was deductible in computing the net wealth of the assessee ? 3. Whether, on the facts and in the circumstances of the case, the sum of Rs. 5,49,041 being the balance of the demand payable as a result of the findings and orders of the Income-tax Investigation Commission was deductible in deter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mited company for distribution to its shareholders, before the general body meeting is held, does not give rise to any debt owed by the company to the shareholders and the amount of the proposed dividend is not, therefore, deductible in the computation of the net wealth as defined in section 2(m) of the Wealth-tax Act. In the instant case, the sum of Rs. 1,53,400 represents the amount provided for by the assessee-company in its accounts on the valuation date, for payment of dividends to the shareholders, as recommended by its directors. It is common ground that the general body meeting for the relevant year was not held on or before the valuation date which is September 30, 1956. The amount of proposed dividend is not, therefore, deductible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et wealth were only those debts which were incurred in relation to the assets declared by the assessee. The Tribunal then proceeded to demonstrate what it believed to be the scheme of the Act by referring to section 2(m), section 4(3) and section 6 of the Wealth-tax Act. The provisions of these sections are set out below : Section 2(m). " '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 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,-- ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assets and debts located outside India ; and (ii) the value of the assets in India represented by any loans or debts owing to the assessee in any case where the interest, if any, pavable on such loans or debts is not to be included in the total income of the assessee under sub-section (3) of section 4 of the Income-tax Act ; shall not be taken into account." The rest of the section is not material. Referring to the provisions of the above sections the Tribunal remarked that they clearly indicate that the principle to be adopted in computing the net wealth is that when any assets are included, corresponding debts are to be allowed, and when such assets are liable to be excluded from the net wealth, corresponding debts are also to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ared assets. Section 4(3) imposes a vicarious liability on an assessee to wealth-tax in respect of assets belonging to certain connected Persons and it lays down that when the value of any such assets is included in the net wealth of an assessee, the debts referable to such assets shall also be allowed. From this, however, it does not necessarily follow that debts which are not referable to any of the assets shall not be allowed in the assessment. Section 6 refers to the assessment of non-citizens and it lays down that in computing the net wealth of such assessees, their assets as well as debts located outside India shall not be taken into account. This section refers to a special class of assessees and special category of assets and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing its net wealth. It is sheer misconception of the law to hold that, to be allowable as a deduction, a debt should be relatable or referable to any particular asset or assets declared by the assessee for the purpose of computation of the net wealth. No such principle can be deduced from the decision of the Supreme Court in the case of Kesoram Industries and Cotton Mills Ltd. in which the allowability of debts has been discussed exhaustively nor, as pointed out above, from the definition of the term "net wealth" in section 2(m) of the Wealth-tax Act. We are, therefore, of the opinion that the Tribunal committed an error of law in taking the view that it did with regard to the sum of Rs. 5,49,041 payable by the assessee on the basis of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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