9911796707
TMI Blog1984 (11) TMI 106X X X X Extracts X X X X X X X X Extracts X X X X ..... or contravention of the provisions of section 4(1) and section 5(1)(a) of the said Act. It was mentioned in the said order that the penalty imposed should be deposited by the assessee at the Bombay Office of the Directorate within 45 days of the date of issue of the said order. The Foreign Exchange Regulation Appellate Board, by order dated 17-1-1980, confirmed the said order of penalty and dismissed the appeal of the assessee. The assessee filed further appeal under section 23EE of the Foreign Exchange Regulation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative for the department relied on the reasons given in the order of the AAC. 5. We have considered the rival submissions and facts on record. Section 2(m) of the Wealth-tax Act, 1957 (' the Act '), so far 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. Clauses (i), (ii) and (iii) of section 2(m) enumerate those debts, which would not be taken into account for computing the net wealth. The scheme, which emerges from sections 2(m) and 3 of the Act, clearly shows that all debts other than those which fall within the exclusionary part of section 2(m), owed by the assessee have to be deducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re can be no escape from the conclusion that the said amount represented debt owed by the assessee on the relevant valuation dates. 7. The question then is whether the facts that the assessee had not subsequently paid the said 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 by the learned 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd and the Government had filed the appeal before the High Court challenging the cancellation of the said order. If in that event, the assessee had claimed deduction on the ground that the cancellation of penalty had not become final, his claim would have been liable to be 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 reasons given by the WTO as well as the AAC are wholly unsustainable. 9. We may usefully refer to the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease to be a liability merely because the assessee had filed an appeal before the higher authorities to get rid of that liability. In other words, disputed liabilities are not necessarily contingent in nature. When this principle is applied to the facts of the present case, it must be held that the amount representing the penalty was a debt owed by the assessee on the relevant valuation dates, in spite of the fact that the assessee had filed an appeal before the High Court and had obtained stay of the operation of the order on furnishing security. 10. Reliance was placed on behalf of the department on the decisions in CWT v. Kantilal Manilal [1973] 88 ITR 125 (Guj.) and Kesoram Industries Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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