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TMI Blog1972 (2) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ce relating to several assessment years, viz., 1957-58 to 1963-64. The following common question of law has been referred for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the provisions of section 2(m) of the Wealth-tax Act, 1957, are applicable for determination of the assessee's interest in the wealth of the firm styled as M/s. J. K. Bankers for the assessment years 1957-58 to 1963-64 ?" The assessee is a Hindu undivided family. It holds through its karta 1/3rd share in a partnership firm of the name and style of Juggilal Kamlapat Bankers (hereinafter referred to as " the firm "). While computing the net wealth of the assessee for each of the seven years, the Wealth-tax Officer had to take in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars that a large sum of money was due from the firm by way of income-tax. The income-tax liability was outstanding on the valuation dates of each of the assessment years in question. The firm had contested the liability by way of appeal but later on entered into a settlement with the department as a result of which the firm withdrew its appeals and the department granted instalments for the payment of the outstanding income-tax liability. Where the assessee is an individual, his net wealth is to be computed in accordance with section 4(1)(b) of the Wealth-tax Act, which reads : " 4. Net wealth to include certain assets.-(1) In computing the net wealth of an individual, there shall be included, as belonging to that individual- ....... (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the valuation of the interest of a partner in a firm is concerned, the same has to be arrived at in accordance with rule 2. According to that rule, first of all the net wealth of the firm on the valuation date has to be determined. Thereafter the same is to be allocated between the partners in the manner indicated in that rule. We are not concerned in this case with the manner in which the net wealth of the firm is to be allocated between the partners. All we are concerned with is to find out as to how the net wealth of the firm should have been determined. The term " net wealth " according to ordinary commercial principles means the real wealth of a man. His real wealth would be his total assets minus the debts owed by him. This is in ess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken into consideration while determining the net wealth of an assessee. The idea of this provision obviously is to ensure that taxes are promptly paid by an assessee, otherwise he would be deprived of the benefit of their deduction while computing his net wealth. This provision obviously applies when computing the net wealth of an assessee. In the instant case the firm is not the assessee so that the net wealth of the firm is not to be assessed. The assessee is the karta of a Hindu undivided family. In computing his net wealth any income-tax liability outstanding against him may not be deducted under this provision but the income-tax liability of a firm, of which he is a partner, cannot be left out of consideration by virtue of this provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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