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TMI Blog1982 (4) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that only 1/5th of this liability could be treated as the liability of the assessee while computing her wealth ? (iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee's claim for deduction of the income-tax demands outstanding against M/s. Kishori Lal Mukundi Lal was hit by the provisions of section 2(m)(iii) of the Wealth-tax Act. (iv) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that only half the amount payable under the decree passed against the assessee branch and Mohan Lal's branch (and not the whole) could be claimed by the assessee as a deduction in her wealth-tax assessments ? (v) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that only 1/5th of the amount payable under the decrees against the HUF of M/s. Kishori Lal Mukundi Lal (and not the whole) could be claimed by the assessee as a deduction in her wealth-tax assessments ? " The reference has been made at the instance of the assessee, Smt. Prem Lata Agarwal, an individual, and the assessment years involved are 1964-65 to 1971-72. The assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee before the Tribunal. The latter did not accept it. It held that an association of persons is not a legal entity and, therefore, even though the income from these properties was being assessed in the hands of the assessee and her son in the status of an association of persons, the property continued to be owned by the assessee and her son. Further, as the gift deed did not specify their shares in these properties, the only presumption would, be that these properties were owned by them equally and, therefore, the Revenue authorities were perfectly justified in including the value of these properties to the extent of one-half in the net wealth of the assessee. Question No. 1 mentioned above arises from this finding. It was urged before us on behalf of the assessee by her learned counsel, Sri Raja Ram Agarwal, that it was a case of joint tenancy and in the event of death of any one of the two owners, the property would pass on to the surviving owner by devolution. Further, according to the counsel, the word " individual " occurring in s. 3 of the Act would include a body of individuals as laid down by the Supreme Court in WTO v. C. K. Mammed Kayi [1981] 129 ITR 307. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n dates relevant to the years under consideration. When the matter came up in appeal before the AAC it was claimed on behalf of the assessee that this liability represented a debt due from the assessee and she being jointly and severally liable to discharge it, the whole of this should be deducted while computing her net wealth and that in any case her liability to the extent of 1/5th should be taken into consideration for this purpose. It was claimed that the assessee had actually paid Rs. 37,000, being approximately the 1/5th of the demand on May 24, 1974, in accordance with an agreement arrived at with the Income-tax Department. The balance amount had been agreed to be realised from the other branches of the family but the Department has reserved its right to recover from the assessee any amount which it failed to realise from the other branches. It was thus claimed that the assessee was at least entitled to a deduction of 1/5th of the demand outstanding against the bigger HUF. The AAC did not accept the contention for the reason that the demand had been created against the bigger HUF long before the relevant valuation dates and had been outstanding for more than one year on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not chargeable under this Act, and (iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958), (a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him, or (b) which, although not claimed by the assessee as not being payable by him, is nevertheless outstanding for a period of more than twelve months on the valuation date. " Under this provision the net wealth is to be arrived at by finding out the excess of the aggregate value of all the assets wherever located, belonging to the assessee on the valuation date and the aggregate value of all the debts owed by the assessee on such valuation date. In other words, the real tax base for the purposes of this Act is the total value computed in accordance with the provisions of this Act of all the assets minus the total value of all the debts. The Word " debt " is not defined under the Act. Its scope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on him and claim a deduction therefor from the value of his assets and at the same time deny his liability to pay the tax to the Department. Similarly, after assessment, he cannot be allowed to let the liability under the assessment outstanding for more than twelve months on the relevant valuation date and still claim deduction for it. The brief analysis of the relevant provisions as given above would show that there is absolutely no justification for saying that sub-cl. (iii) refers only to a tax liability, outstanding against the assessee, or that it should be the assessee's own personal liability and it should not be the liability attached to property. There is absolutely no warrant for this sort of dichotomy. It is correct that in respect of a liability outstanding against an HUF, it can be enforced against the coparceners of the family to the extent of the family property in their hands. That does not mean that it is not the liability of each such member of the coparcenary. There is nothing in this provision to warrant the inference that the scope of sub-cl . (iii) is in any way limited as contended by the learned counsel. Reliance was placed by the assessee's counsel on ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance was placed is a decision of this court in CWT v. Padampat Singhania [1973] 90 ITR 418. The question involved in that case was entirely different. There the assessee, an HUF, had an one-third share in a partnership. While computing the net wealth of the 1983] SMT. PREM LATA AGARWAL V. C. W. T. "I assessee, it was necessary to take into consideration the assessee's share in the wealth of the firm. In computing the net wealth of the firm the ITO ignored the arrears of income-tax due by the firm. The AAC confirmed that order. The Appellate Tribunal held that the AAC wrongly held that s. 2(m) of the W.T. Act was applicable and, therefore, the outstanding income-tax liability was deductible while computing the net wealth of the firm for determining the wealth of the assessee. On a reference this court confirmed the view taken by the Tribunal and held that in computing the net wealth of the assessee, any income-tax liability outstanding against him may not be deducted under s. 2(m)(iii)(b) but the income-tax liability of a firm, of which he was a partner, cannot be left out of consideration by virtue of the said provision. While determining the net wealth of the firm, not for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The facts which have led to questions 4 and 5 may be given in brief. The assessee claimed deduction of a sum of Rs. 2,43,634 on account of decrees passed against the assessee's branch and Mohan Lal's branch. That amount consisted of Rs. 1,46,559 principal and Rs. 97,074 being interest calculated at the rate of four per cent. from September 9, 1935, to May 31, 1968. The AAC determined the total liability on account of this debt at Rs. 1,46,559 only for the reason that there was no evidence to show that the assessee had admitted its liability to pay any interest on those debts. It was not disputed by the AAC that the nature of the liability was joint and several, but in his opinion the assessee was entitled to deduction of one-half of the aforesaid amount of Rs. 1,47,550 only. Apart from that the assessee had claimed deduction of Rs. 5,35,312 on account of a decree against the bigger HUF of M/s. Kishori Lal Mukundi Lal in favour of Calcutta parties. This amount as well consisted of Rs. 2,09,272 principal and Rs. 3,26,040 interest calculated at the rate of six per cent. from 1938 to 1964. According to the AAC the real liability was in respect of the principal amount only and he allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, the brief facts are that in a partition suit this court had granted decree for a sum of Rs. 5,52,027 in favour of late Baijnath Prasad against the other branches of the family. One of those branches was known as the Calcutta branch and the other as Naini branch. The decree against the Calcutta branch was for a sum of Rs. 2,74,910 and against the Naini branch for Rs. 2,77,117. The claim of the assessee was that while computing her net wealth the value of this decree should be taken at nil because the judgment debtors had challenged the decree and I there was no hope of any recovery from them. That contention was repelled by the WTO as also by the AAC. The Appellate Tribunal as well took the same view. It found that the decree against the Naini branch was settled for Rs. 1,75,000 in November, 1974, and the amount was realised by the assessee. Similarly the decree against Calcutta branch was settled for Rs. 1,86,000 by means of a compromise dated 14-3-1976 and that amount as well was realised. The Appellate Tribunal hence instead of taking the face value of the decrees took into consideration the amounts at which they were ultimately settled. On the facts found by the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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