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TMI Blog1971 (2) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... account and balance-sheet of the said company but which was actually levied on the company after the valuation date could be said to be a part of the total debt owed within the meaning of section 2(m) of the Wealth-tax Act, 1957, while arriving at the market price of the shares of the said company within the meaning of section 7(1) of the Act ? 2. Whether, on the facts and in the circumstances of the case, the sum of Rs. 6,859.06 which was the income-tax and wealth-tax levied on the assessee-respondent, though after the valuation date, was debt owed within the meaning of section 2(m) of the Wealth-tax Act, 1957 ? " The facts relevant to the first question may be briefly stated : Smt. Sheela Bharat Ram (hereinafter referred to as " th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t satisfied with this direction of the Appellate Assistant Commissioner. As, by that time, the assessment of the company had also been completed and it was found that the provision for taxation made by the company in its balance-sheet was short by Rs. 95,851 to its actual liability for the accounting year. Therefore, the assessee preferred a second appeal before the Tribunal and contended that this amount of Rs. 95,851 also may be deducted from the value of the assets of the company in addition to the amount of Rs. 6,34,169 which was provided in the balance-sheet of the company for meeting its tax liability. The Tribunal accepted this additional claim of the assessee and directed that the said amount of Rs. 95,851 also should be deducted fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount was a debt owed within the meaning of section 2(m) of the Wealth-tax Act, 1957, and, as such, deductible in computing the net wealth of the assessee ? " Subba Rao J. (as he then was), delivering the majority judgment in that case, answered this question in the affirmative. Both the question and answer by themselves may appear to support the contention urged by the learned counsel for the Revenue but the reasoning in support of the answer given by the Supreme Court would make it clear that it is not the amount provided by the assessee in its balance-sheet for meeting its tax liability that is deductible in computing the net wealth of the assessee, but it is the amount which represents the actual tax liability of the assessee for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urable to the assessee. All the ingredients of a 'debt' are present. It is a present liability of an ascertainable amount. " It is clear from the observations of the Supreme Court that it is the actual amount of income-tax which the assessee has to pay on its income during the relevant accounting year, that amounts to a " debt owed " within the meaning of section 2(m) of the Act irrespective of the amount which is provided by the assessee in its balance-sheet for meeting its tax liability. This was the interpretation put by the Supreme Court itself in a later case in H. H. Setu Parvati Bayi v. Commissioner of Wealth-tax. After referring to the rule laid down in the case of Kesoram Industries, which has been reproduced above, the Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case would enable the assessee to claim deduction of the entire amount so provided by him ? The answer obviously is in the negative. It would, therefore, follow that, if the amount provided by the assessee in its balance-sheet falls short of its actual tax liability, the assessee's claim for deduction of the amount of tax payable by him cannot be restricted to the amount provided in its balance-sheet. It is the actual amount of tax payable by the assessee that is deductible in computing the value of the net wealth of the assessee. The Tribunal was, therefore, right in allowing the assessee's claim for the deduction of the further amount of Rs. 95,851 and we answer the first question referred to us in the affirmative, i.e., for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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