V.T. Venkateswaran Vs. Commissioner of Income-tax - Court Judgment

Excerpt:
- n.v. balasubramanian, j.1. the following question of law has been referred by the tribunal for our consideration under s. 27(1) of the wt act, 1957 : 'whether, on the facts and in the circumstances of the case, in deducting the liability to wealth-tax for the asst. yr. 1973-74 as a debt owed on the valuation dt. 31st december, 1973, the amount deductible is the tax estimated on the returned wealth or the amount assessed on the net wealth determined by the wto ?' 2. the assessee is an individual and in the wealth-tax proceedings for the asst. yr. 1973-74, the assessee claimed that the income-tax and wealth-tax should be deducted as debt owed by the assessee on the valuation date. the assessee had claimed a deduction of a sum of rs. 39,979 being the estimated wealth-tax liability for the asst. yr. 1973-74 as on the valuation dt. 31st december, 1972. the wto allowed the deduction of rs. 64,400 as wealth-tax liability based on the assessed net wealth for the asst. yr. 1973-74. the wto, however, in the order of assessment passed by him determined the wealth-tax payable for the assessment year at rs. 64,848. 3. the assessee filed an appeal to the cwt(a) contending that the wealth-tax determined as payable for the asst. yr. 1973-74 should be allowed as a deduction towards the wealth-tax liability for the asst. yr. 1973-74. the cwt(a) allowed the claim of the assessee and directed the wto to substitute the wealth-tax determined by him instead of the sum of rs. 64,400 as an allowable deduction. 4. the revenue carried the matter in appeal to the tribunal and the tribunal found that the provisions of s. 2(m)(iii) of the act are attracted and the assessee would be entitled to deduction of the wealth-tax on the returned figure and the cwt(a) was not correct in holding that the deduction should be on the amount of wealth-tax determined in the order of the wto. there was a miscellaneous application filed before the tribunal by the assessee pointing out that on the basis of the decision of the supreme court in kesoram industries & cotton mills ltd. vs . cwt : [1966]59itr767(sc) , the assessee is entitled to deduction on the tax liability as determined by the wto as debt owed on the valuation date. the tribunal, however, held that there is a conflict of view among the supreme court and, therefore, it felt that the matter should be referred to this court. accordingly, at the instance of the assessee, the question of law mentioned earlier has been referred to us. 5. we have gone through the order of the tribunal and we find that the tribunal proceeded on a wrong basis that the provisions of s. 2(m)(iii) of the act are attracted to the facts of this case. it is not a case of outstanding liability on the basis of any order passed under any of the provisions of the direct taxes acts and which was outstanding for a period of more than 12 months on the valuation date. the assessee claimed during the course of the assessment proceedings for the asst. yr. 1973-74 wealth-tax liability for 1973-74 should be allowed as a deduction and from the nature of the claim it is clear that it is not an outstanding liability existing for more than 12 months. in other words, it is a current liability for which the assessee claimed deduction. the tribunal is wrong in holding that the provisions of s. 2(m)(iii) of the act are attracted to the facts of the case. 6. the decisions of the supreme court in cwt vs . k. s. n. bhatt : [1984]145itr1(sc) and cwt vs . vadilal lallubhai : [1984]145itr11(sc) are clear authorities for the proposition the assessee is entitled to claim for deduction of the wealth-tax liability as finally assessed or determined by the wto. therefore, the assessee would be entitled to the amount assessed on the net wealth and the deduction of the debt cannot be restricted to the amount arrived at on the basis of the net wealth returned. in view of the decisions of the supreme court holding that the assessee is entitled to the deduction of the wealth-tax liability as finally determined by the wto, the view of the tribunal that the assessee would be entitled to deduction only on the net wealth returned is plainly erroneous in law. 7. the question of law referred to us is not happily framed as both the alternatives are mixed up in the question of law referred to us. therefore, we reframe the question as under : 'whether, on the facts and circumstances of the case, the tribunal was right in law in holding that in determining the net wealth the liability to be deducted towards the wealth-tax would be the tax estimated on the returned wealth as a debt owed on the valuation date ?' we answer the question of law as reframed by us in the negative and in favour of the assessee. no costs.