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TMI Blog1983 (6) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Corporation on his life insurance policy. In the wealth-tax proceedings for the year 1974-75, the assessee claimed a deduction in relation to the aggregate sum of Rs. 52,485 on the ground that they are debts owed by him on the valuation date and that, therefore, they should be deducted. The WTO, however, rejected the claim on the ground that the debts had been secured against exempted assets and that, therefore, they cannot be deducted in computing the net wealth of the assessee in view of s. 2(m)(ii) of the W.T. Act. Aggrieved by the decision of the WTO, an appeal was filed before the AAC, but without success. Thereafter, the matter was taken to the Tribunal. The Tribunal, following its earlier decision rendered in the assessee's own case for the earlier assessment year 1973-74, negatived the claim of the assessee. Aggrieved by the view taken by the Tribunal, on this aspect of the matter, the assessee has raised the question No.1 referred to supra. In the same wealth-tax proceedings, the assessee was found to have paid excess advance tax of a sum of Rs. 11,676. The WTO treated this amount as an asset and included the same in his net wealth. The assessee took the matter in ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed in view of s. 2(m)(ii) of the W.T. Act. We are in entire agreement with the view taken by this court in Srinivasan v. CWT [1980] 123 ITR 464. Hence, following the said decision, we answer question No. 1 in the affirmative and against the assessee. Coming to the second question, as already stated, the Tribunal has treated the excess advance tax paid by the assessee as a deposit by the assessee with the Government and that as the assessee continued to be the owner of the said sum, it should be treated as an asset of the assessee and included in his total wealth. The learned counsel for the assessee contends that the view taken by the Tribunal that the excess advance tax paid by the assessee is a deposit by the assessee with the Government is not legally sustainable when the advance tax is paid as per the provisions of the statute and the non-payment of which is made penal and that, therefore, the notion of a deposit will run contra to the statutory provisions. The learned counsel for the assessee also brings to our notice the decision of a Bench of this court in joint Official Liquidators of the Peerdan Juharmal Bank v. CIT [1954] 25 ITR 140 and the decision of the Calcutta H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a reserve, we also feel that having regard to the statutory provisions which compel the assessee to pay advance tax and make the non-payment of advance tax penal the amount of advance tax or excess advance tax paid, in pursuance of a statutory compulsion, cannot be taken to be a deposit. As matter of fact, the learned counsel for the Revenue, does not seek to support the reasoning given by the Tribunal for taking the view that the excess advance tax is an asset of the assessee and that it has to be included in his net wealth. Mr. Jayaraman, the learned counsel for the Revenue, however, seeks to support the view taken by the Tribunal by a different reasoning which appears to us to be consistent with the statutory provisions. According to him, not only the excess advance tax, but the entire advance tax paid has to be treated as an asset of the assessee on the valuation date and at the same time, the entire liability towards income-tax should be taken as a debt owed to the State. If such a calculation is made, the excess advance tax paid will fall on the assets side and naturally it will be included in the net wealth of the assessee. The learned counsel for the assessee contends that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to s. 219 of the I.T. Act which provides for a credit being given to the assessee for the payment of advance tax at the stage of the regular assessment, the payment of advance tax cannot be taken to be a final payment towards tax as contended by the learned counsel for the assessee. Giving credit at the stage of the regular assessment or at the stage of the provisional assessment under s. 141A of the I.T. Act as provided under s. 219 of the said Act, will arise only if the assessee is entitled to the credit, that is, when he is the owner of the amount paid which has to be given credit. The fact that s. 219 of the Act contemplates credit being given to the assessee for his payment towards advance tax at the time of the regular assessment, shows that the Legislature intended that the advance payment of tax is a tentative payment towards a liability and after the assessee's actual liability is determined at the stage of the regular assessment, the assessee will get the credit for the advance tax paid earlier as required under the provisions of the I.T. Act. The learned counsel for the assessee refers to the decision in CWT v. Arvindbhai Chinubhai [1982] 133 ITR 800 (Guj), as supporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, be taken as a debt owed. But the Supreme Court rejected the Revenue's contention and held that the liability to pay income-tax accrues on the last day of the accounting year and though the amount of tax is quantified only at the time of final assessment, the liability should be taken to have accrued and it cannot be said to be a contingent liability. The issue before the learned judges of the Gujarat High Court was whether the excess advance income-tax paid can be taken to be an asset of the assessee on the relevant valuation date and the view taken by the court was that the mere possibility of getting income-tax refund in future as and when the assessment proceedings are finalised would not form part of an asset of the assessee on the valuation date, that on the valuation date what the assessee does, is to discharge his legal and statutory obligations of paying advance tax, which, if undischarged, will remain as a debt owed by him on the valuation date, and that, therefore, the payment of any advance tax cannot be treated as an asset of the assessee which belongs to him. With respect, we are not inclined to accept the reasoning of the learned judges of the Gujarat High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax liability. That means the advance tax paid has to be brought on the credit side and the accrued income-tax liability on the debit side. We are, therefore, inclined to agree with the contention of the learned counsel for the Revenue that having regard to the statutory provisions dealing with the payment of advance tax and the final assessment including s. 219 of the Act, it is proper to take the entire advance tax as an asset of the assessee and the entire accrued income-tax liability for the relevant accounting year as a debt owed by the assessee to the Government. In this case, if such a treatment is given to the advance tax paid and also to the accrued liability, which is admittedly a debt owed by the assessee to the Government, the result will be the excess advance tax will continue to have the character of an asset of the assessee. In CWT v. Arvindbhai Chinubhai [1982] 133 ITR 800 (Guj), the court has referred to rules ID and 2D of the W.T. Rules, 1957, as indicating the intention of the Legislature not to treat the advance tax paid as an asset of the assessee. Rule ID of the Act deals with the determination of the market value of unquoted equity shares of companies o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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