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1975 (7) TMI 14

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..... edicines at Datia and had other sources of income also. On 28th May, 1965, he made a voluntary disclosure of his concealed income of Rs. 5 lakhs. This disclosure was made under section 68 of the Finance Act, 1965. The disclosure was accepted and the assessee paid a sum of Rs. 3 lakhs as income-tax on the disclosed income of Rs. 5 lakhs. It was the assessee's case that he had earned this income during a number of years in the past. In the wealth-tax returns for the years 1960-61 and 1961-62, he included in his net wealth a sum of Rs. 2,25,000 in the first year and a sum of Rs. 2,80,000 in the next year out of the concealed income. This was accepted by the Wealth-tax Officer. The assessee, however, appears not to have claimed any deduction .....

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..... "Net wealth" has been defined in section 2(m) to mean the amount by which the aggregate value computed in accordance with the provisions of the Act of all the assets belonging to the assessee on the valuation date is in excess of the aggregate value of the debts owed by him on the valuation date except those which are enumerated in clauses (i) and (ii) of section 2(m). In other words, wealth-tax is payable on the value of the total assets of a person minus the debts owed by him. The question which has to be decided is as to whether the assessee owed any debt by way of income-tax liability on the corresponding valuation dates of the financial years 1960-61 and 1961-62, for the purposes of the Wealth-tax Act. Now, admittedly, the assessee w .....

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..... ts for assessment in the relevant assessment years but the assessments had not been made on the valuation dates, even then the assessee would be entitled to deduct the income-tax payable by him and such liability would amount to a debt owed by him. The fact that he did not disclose this income at the appropriate time and evaded the tax does not mean that he was not liable to pay the tax. As stated earlier, the liability to pay income-tax arises when the income is earned and not when it is disclosed or discovered. The quantification and determination of tax may be delayed because of the attempt of the assessee to conceal it from the department but his liability remains. A question then arises whether this position has changed as a result o .....

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..... son, escaped the charge because of the attempt of the assessee to conceal it. An assessee, therefore, can offer for assessment under the disclosure scheme a part of his income which was liable to income-tax. If the income disclosed by him is not liable to tax under the Income-tax Act, it would not be liable to tax under the disclosure scheme either. In Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax [1966] 59 ITR 767, the assessee-company had, in its balance-sheet for the year ending on 31st March, 1957, shown certain amount as provision for payment of income-tax and super-tax in respect of that year. The question was whether that amount was a "debt owed" within the meaning of section 2(m) of the Wealth-tax Act, 195 .....

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..... enti which arose on the close of the relevant previous years. It was an ascertainable liability. The fact that it was quantified not in the relevant assessment years but in 1965 did not make any difference. The fact that the tax was paid by the assessee at the rate specified in sub-section (3) of section 68 of the Finance Act, 1965, instead of the rates specified in the Finance Acts for 1960-61 and 1961-62 also did not change the legal position. Of course, in the case before the Supreme Court the assessee-company had made a provision in its balance-sheet for income-tax and super-tax and no such provision had been made by the assessee in the instant case. That again is a circumstance which is not material. The liability of the assessee for p .....

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..... e rate specified in sub-section (3) in respect of the concealed income so declared. Now, the expression "notwithstanding anything contained in the Income-tax Act", in our opinion, qualifies the words "rate of tax". It only means that whatever might be the rate of tax prescribed in the Income-tax Act read with the relevant Finance Act, in respect of the concealed income declared under section 68 the tax shall be charged at a flat rate of 60 per cent. as provided in subsection (3) of section 68. The change in the rate of tax does not affect the liability of the assessee to the income-tax under the Indian Income-tax Act. We are of the opinion that the income-tax paid by the assessee in accordance with section 68(3) of the Finance Act, 1965, is .....

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