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TMI Blog1984 (11) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bombay Officer of the Directorate within 45 days of the date of issue of the said order. The Foreign Exchange Regulation Appellate Board by order dt. 17th Jan., 1980, confirmed the said order of penalty and dismissed the appeal of the assessee. The assessee filed further appeal under s. 24EE of the Act to the High Court. The High Court stayed the recovery of the amount on the condition of furnishing of security by the assessee. The High Court has not yet disposed of the said appeal. 2. The assessee claimed deduction of the said amount of Rs. 5,00,000 in both the assessment years on the ground that it represented a debt owned by the assessee on the relevant valuation dates. The WTO as well as the AAC has disallowed the said claim. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as relevant, defines "net wealth" as the amount by which the aggregate value of all the assets is in excess of the aggregate value of all the debts owed by the assessee on the valuation date. Cls. (i), (ii) and (iii) of s. 2(m) enumerate those debts, which would not be taken into account for computing the net wealth. The scheme which emerges from ss. 2(m) and 3 of the Wt Act clearly shows that all debts other than those which fall within the exclusionary part of s. 2(m), owned by the assessee have to be deducted from the aggregate value of assets belonging to him on the valuation date. In other hands, in order to get disqualified for the purposes of deduction, the debt must fall within the exclusionary part. In the present case, admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id amount and that the assessee had obtained an order staying the recovery of the said amount on furnishing security from the High Court by filing an appeal would make any difference. The view expressed by the WTO as well as the ld. AAC is that this would make a difference. We are unable to agree with this view. On account of the said order the date for payment of penalty stands postponed to the future date and that future date is the date on which the High Court would finally dispose of the appeal. The said order does not obliterate the debt itself. Consequently, it cannot be said that because of the stay order the said account did not represent the debt owed by the assessee on the relevant valuation dates. Similarly the fact that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have been liable to the rejected. However, in the present case, enforceable order of penalty existed not only on the relevant valuation dates but also on the date of the assessment order. Consequently, the mere fact that the assessee was contesting the legality of the penalty by filing an appeal before the High Court, would not mean that the liability had not crystallised. The reason given by the WTO as well as the AAC are wholly unsustainable. 9. We may usefully refer to the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 363 (SC). In that case, the sales-tax liability in respect of the relevant accounting year had been raised against the assessee after filing of the return and the assessee claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the present case, it must be held that the amount representing the penalty was a debt owned by the assessee on the relevant valuation dates inspite of the fact that the assessee had filed appeal before the High Court and had obtained stay of the operation of the order on furnishing security. 10. Reliance was paced on behalf of the department on the decision in CWT vs. Kantilal Manilal (1973) 88 ITR 125 (Guj) and Kesoram Industries Cotton Mills Ltd. vs. CWT (1966) 59 ITR 767 (SC) in support of the contention that unpaid and disputed liability did not amount to debt owed by the assessee on the relevant valuation date. 11. We have carefully considered these decision. In the case of Kantilal Manilal all the has been laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X
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