1965 JTR(SC) 317
1966 60 ITR 267
SUPREME COURT OF INDIA
K. SUBBA RAO, J. C. SHAH and S. M. SIKRI JJ.
ASSAM OIL CO. LTD.
Versus
COMMISSIONER OF WEALTH-TAX (CENTRAL), CALCUTTA.
STANDARD MILLS CO. LTD.: INTERVENER.
Date of decision: 24/11/1965.
Civil Appeals Nos. 66 and 67 of 1965.
Appeals from the judgment and order of the Calcutta High Court dated May 14, 1962, in Wealth-tax Reference No. 153 of 1960. The decision of the High Court is reported as Assam Oil Co. Ltd. v. Commissioner of Wealth-tax [1963] 48 I.T.R. 49.
Advocates appeared
B. R. L. lyengar and D. N. Gupta for the assessee.
A. V. Viswanatha Sastri, Senior Advocate (N. D. Karkhanis, R. H. Dhebar, B. R. G. K. Achar, and R. N. Sachthey with him), for the Commissioner.
N. A. Palkhivala, Senior Advocate (T. A. Ramachandran and J. B. Dadachanji of J. B. Dadachanji and Co. with him), for the intervener.
Liability to pay tax under the Income-tax Act, including estimated provisions for future tax and demands for advance payment, constitutes a "debt owed" by the assessee on the valuation date under Section 2(m) of the Wealth-tax Act.
Act
Referred
:INCOME TAX ACT
: S.18(a)(1)
WEALTH TAX ACT: S.2
(A) Wealth-tax Act - Section 2(m) - Indian Income-tax Act - Section 18A - Debt owed - Whether estimated provision for meeting future tax liability and final installment of demand for advance payment of tax constitute a debt owed by the assessee on the valuation date - Liability to pay tax under the Income-tax Act is a debt owed by the assessee on the relevant valuation date within the meaning of Section 2(m) of the Wealth-tax Act.
(B) Wealth-tax Act - Section 2(m) - Indian Income-tax Act - Section 18A - Demand for advance payment of tax is a debt within the meaning of Section 2(m) of the Wealth-tax Act.
Facts of the case:
An assessee company had set apart a sum as an estimated provision for meeting its future tax liability, less the last installment of demand under the Income-tax Act. Additionally, a final installment was due under the Income-tax Act on the valuation date. The question arose whether these sums constituted debts owed by the assessee for the purpose of computing net wealth under the Wealth-tax Act.
Findings of Court:
The court held that both the estimated provision for future tax liability and the demand for advance payment of tax under the Income-tax Act are debts owed by the assessee within the meaning of Section 2(m) of the Wealth-tax Act.
Issues: Whether an estimated provision for future tax liability and a final installment due under the Income-tax Act constitute a debt owed by the assessee on the valuation date within the meaning of Section 2(m) of the Wealth-tax Act.
Ratio Decidendi: Following established precedents, the court determined that tax liability under the Income-tax Act, including demands for advance payment, qualifies as a debt owed by the assessee on the relevant valuation date for the purposes of the Wealth-tax Act.
Result: Civil Appeal No. 66 allowed; Civil Appeal No. 67 dismissed.
(B) Wealth-tax Act - Section 2(m) - Indian Income-tax Act - Section 18A - Demand for advance payment of tax is a debt within the meaning of Section 2(m) of the Wealth-tax Act.
Facts of the case:
An assessee company had set apart a sum as an estimated provision for meeting its future tax liability, less the last installment of demand under the Income-tax Act. Additionally, a final installment was due under the Income-tax Act on the valuation date. The question arose whether these sums constituted debts owed by the assessee for the purpose of computing net wealth under the Wealth-tax Act.
Findings of Court:
The court held that both the estimated provision for future tax liability and the demand for advance payment of tax under the Income-tax Act are debts owed by the assessee within the meaning of Section 2(m) of the Wealth-tax Act.
Issues: Whether an estimated provision for future tax liability and a final installment due under the Income-tax Act constitute a debt owed by the assessee on the valuation date within the meaning of Section 2(m) of the Wealth-tax Act.
Ratio Decidendi: Following established precedents, the court determined that tax liability under the Income-tax Act, including demands for advance payment, qualifies as a debt owed by the assessee on the relevant valuation date for the purposes of the Wealth-tax Act.
Result: Civil Appeal No. 66 allowed; Civil Appeal No. 67 dismissed.
Tax-liability - The court held that the liability to pay tax under the Indian Income-tax Act is a debt owed by the assessee within the meaning of the Wealth-tax Act.
Advance-tax - The court held that the demand for advance payment of tax under section 18A of the Income-tax Act constitutes a debt under the Wealth-tax Act.
JUDGMENT
SUBBA RAO J.-These two appeals, which are cross-appeals, arise out of the same judgment of the High Court of Calcutta. The former was filed by the Assam Oil Company Ltd., and the latter, by the Commissioner of Wealth-tax (Central), Calcutta. The following two questions were referred to the High Court for its decision :
"(1) Whether, on the facts and in the circumstances of the case, the sum of £2,486,180 which had been set apart by the assessee-company as an estimated provision for meeting its tax liability in future less the last instalment of demand under section 18A(1) of the Indian Income-tax Act was a debt owed by the assessee on the relevant valuation date within the meaning of clause (m) of section 2 of the Wealth-tax Act ?
(2) Whether, oh the facts and in the circumstances of the case, in computing the net wealth of the assessee the final instalment of Rs. 47,86,207 due under section 18A of the Indian Income-tax Act constituted a debt owed by the assessee within the meaning of clause (m) of section 2 of the Wealth-tax Act as on the valuation date being 31st December, 1956 ?"
A Division Bench of the Calcutta High Court answered the first question in the negative and the second question in the affirmative. The correctness of the answer to the first question is canvassed in Civil Appeal No. 66 of 1965 and that of the second question, in Civil Appeal No. 67 of 1965.
We have held in Kesoram Industries & Cotton Mills Ltd. v. Commissioner of Wealth-tax {Civil Appeal No. 539 of 1964.-Since reported in [1966] 59 I.T.R. 767 (SC).}, in which judgment was just now delivered, that the liability to pay tax under the Indian Income-tax Act is a debt owed by the assessee on the relevant valuation date within the meaning of clause (m) of section 2 of the Wealth-tax Act. Following that judgment, we answer the first question in the affirmative. The result is that Civil Appeal No. 66 of 1965 is allowed with costs.
This court in Commissioner of Wealth-tax v. Standard Vacuum Oil Co. Ltd. {Civil Appeal Nos. 627 & 628 of 1964 (decided on 25-10-1965).-Since reported in [1966] 59 I.T.R. 569 (SC.).} held that demand for advance payment of tax under section 18A of the Income-tax Act was a debt within the meaning of section 2(m) of the Wealth-tax Act. Following that judgment, we dismiss Civil Appeal No. 67 of 1.965 with costs.
SHAH J.-I agree that Civil Appeal No. 67 of 1965 should fail. For reasons mentioned in the judgment delivered by me in Civil Appeal No. 539 of 1964, Kesoram Industries & Cotton Mills Ltd. v. Commissioner of Wealth-tax {[1966] 59 I.T.R. 767 (SC.).}, Appeal No. 66 of 1965 should also fail.
ORDER.- In accordance with the opinion of the majority. Civil Appeal No. 66 of 1965 is allowed with costs. Civil Appeal No. 67 of 1965 is unanimously dismissed with costs.
Civil Appeal No. 66 of 1965 allowed.
Civil Appeal No. 67 of 1965 dismissed.
For Citation : (1966) 60 ITR 267 (SC)