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TMI Blog1973 (5) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... EE., S. HAZRA. JUDGMENT SABYASACHI MUKHARJI J.-In this reference under section 27(3) of the Wealth-tax Act, 1957, the following question has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amount provided by the assessee in its accounts for payment of pension to persons who had already retired was a debt owed by the assessee on the valuation date within the meaning of section 2(m) of the Wealth-tax Act and was as such to be excluded from the net wealth of the assessee ? " The reference arises out of the wealth-tax assessment made on the assessee-company for the assessment years 1957-58, 1958-59 and 1959-60, the relevant valuation dates being the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained liabilities could be deducted in working out the net wealth of a company carrying on business. The assessee-company, thereafter, preferred an appeal before the Tribunal. The Tribunal in respect of this aspect of the matter observed that so far as the payment of pension was concerned the amount could be divided into three categories, namely, (a) amounts payable as pension to persons who had already retired, (b) amount payable as pension to persons who had completed 15 years of service or exceeded the age of 45 years, and (c) amount payable as pension to persons who had not completed 15 years of service. The Tribunal was of the opinion that the last two categories although comprised of wealth set apart for payment of pension, still the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(m) of the Wealth-tax Act, 1957, could be defined as a liability to pay in praesenti or in futuro an ascertainable sum of money. Therefore, we have to consider whether it was a debt owed on the relevant valuation date. It appears from page 32 of the paper book that the scheme stipulated that a pension scheme should forthwith be established for the benefit of such of the existing employees of the company on its covenanted staff as from time to time might be declared by the directors eligible to the benefit of such scheme and for such employees of the company on its covenanted staff as may thereafter be engaged, who by the terms of their employment were declared eligible to the benefit of such scheme upon and subject to the terms and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (g) below shall be determined on the basis of the following formula ....... " The said scheme was introduced by the resolution passed by the directors on the 15th of March, 1951. Now, it is clear that in respect of the persons who had been declared eligible for pension and who had completed the service without being dismissed for dishonesty or misconduct and had completed either 15 years of service or attained 45 years of age would be entitled to enforce the payment of pension against the company. Therefore, in respect of the pension to these persons the company had on the relevant valuation dates a liability to pay pension in praesenti to these persons. Therefore, the provision made for this contingency was a debt owed within the mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , had only a right to claim gratuity on retirement. The Supreme Court was not considering the case of persons who had already earned the right to get gratuity on retirement or on the fulfilment of the conditions mentioned in the gratuity scheme. It may also be observed that it was conceded by counsel for the assessee in that case before the Supreme Court that the liability to pay gratuity to the employees whose services were not determined at the relevant year of account was merely contingent since it arose on the happening of certain events, such as death, personal incapacity, voluntary retirement or resignation and on that account it was not a debt within the meaning of section 2(m) of the Act. Therefore, the Supreme Court was considering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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