1965 JTR(SC) 379
1966 60 ITR 267
SUPREME COURT OF INDIA
K. Summa Rao, Shah, S.M. Sikri, JJ.
Civil Appeal Nos. 66 and 67 of 1965
Decided On : 24-11-1965
Tax liabilities under the Indian Income Tax Act and the demand for advance payment of tax under Section 18-A are considered as debts owed by the assessee for the purpose of computing net wealth under the Wealth Tax Act.
Act
Referred
:INCOME TAX ACT : S.18(a)(1)
INDIAN PENAL CODE : S.18(a)
WEALTH TAX ACT : S.2(m)
Debt Owed - Tax Liability - The liability to pay tax under the Indian Income Tax Act is considered 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. The demand for advance payment of tax under Section 18-A of the Income Tax Act is also considered a debt within the meaning of Section 2(m) of the Wealth Tax Act.
Fact of the Case:
The appeals arose from the same judgment of the High Court of Calcutta, involving questions related to the treatment of tax liabilities as debts owed by the assessee for the purpose of computing net wealth.
Finding of the Court:
The Court held 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. The demand for advance payment of tax under Section 18-A of the Income Tax Act was also considered a debt within the meaning of Section 2(m) of the Wealth Tax Act.
Issues: The issues involved whether certain provisions for tax liability and the final instalment of tax due under the Income Tax Act constituted debts owed by the assessee for the purpose of computing net wealth under the Wealth Tax Act.
Ratio Decidendi: The ratio decidendi was based on the interpretation of the relevant provisions of the Wealth Tax Act and the Income Tax Act, establishing that tax liabilities and advance tax payments are to be considered as debts owed by the assessee for the purpose of computing net wealth.
Final Decision: Civil Appeal No. 66 of 1965 was allowed with costs, while Civil Appeal No. 67 of 1965 was unanimously dismissed with costs.
Debt Owed - Tax Liability - The liability to pay tax under the Indian Income Tax Act is considered 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. The demand for advance payment of tax under Section 18-A of the Income Tax Act is also considered a debt within the meaning of Section 2(m) of the Wealth Tax Act.
Fact of the Case:
The appeals arose from the same judgment of the High Court of Calcutta, involving questions related to the treatment of tax liabilities as debts owed by the assessee for the purpose of computing net wealth.
Finding of the Court:
The Court held 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. The demand for advance payment of tax under Section 18-A of the Income Tax Act was also considered a debt within the meaning of Section 2(m) of the Wealth Tax Act.
Issues: The issues involved whether certain provisions for tax liability and the final instalment of tax due under the Income Tax Act constituted debts owed by the assessee for the purpose of computing net wealth under the Wealth Tax Act.
Ratio Decidendi: The ratio decidendi was based on the interpretation of the relevant provisions of the Wealth Tax Act and the Income Tax Act, establishing that tax liabilities and advance tax payments are to be considered as debts owed by the assessee for the purpose of computing net wealth.
Final Decision: Civil Appeal No. 66 of 1965 was allowed with costs, while Civil Appeal No. 67 of 1965 was unanimously dismissed with costs.
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 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 Rs. 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 18-A (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, on 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 18-A 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 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.
2. We have held in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth Tax (Central), Calcutta, Civil Appeal No 53 of 1964 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.
3. This Court in Commissioner of Wealth Tax (Central), Calcutta v. Standard Vacuum Oil Co., Ltd., Civil Appeal Nos. 627 & 628 of 1964 (decided on 25-10-1965), held that demand for advance payment of tax under Section 18-A 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 1965 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 and Cotton Mills Ltd. v. Commissioner of Wealth Tax (Central), Calcutta, Civil Appeal No. 66 of 1965 should also fail.
ORDER
2. In accordance with the opinion of the majority, Civil Appeal No. 539 of 1964 is partly allowed and parties will bear their own costs here and in the High Court. Civil Appeal No. 66 of 1965 is allowed with costs
3. Civil Appeal No. 67 of 1965 is unanimously dismissed with costs.