TMI Blog1992 (5) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... missible under the provisions of the Wealth-tax Act ?" According to the statement of case, the appellant, the erstwhile Raja of Jeypore, owner of extensive forests, prior to the abolition of estates in 1953, was assessed to income-tax, on forest income, for the assessment years 1942-43 to 1946-47 to an aggregate of Rs. 6,69,766. The validity of the levy was decided ultimately by the High Court in a reference under section 66 of the Indian Income-tax Act, 1922 (in brief "the Act"), in Vikram Deo Varma, Maharaja of Jeypore v. CIT [1956] 29 ITR 76 (Orissa), and it was held that the income being from agriculture was not exigible to tax. On further appeal to this court at the instance of the Department, the order of the High Court was set aside on October 14, 1958, and the assessee was held liable to pay tax on the forest income. In conformity with the order passed by this court, the Tribunal passed the order under section 66(5) read with section 66A(4) of the Act after June 30, 1964. In pursuance of this order, the Income-tax Officer issued fresh notice of demand on October 4, 1964, and the amount was paid on March 25, 1965. In wealth-tax assessments for the years 1962-63 to 1965-66, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined unpaid for more than 12 months on the valuation date. To examine the correctness of it, section 2(m) of the Wealthtax Act is extracted below: "'Net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than (i) debts which under section 6 are not to be taken into account; (ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act ; and (iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958), (a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant shall be deemed to have been pending till then. In our opinion, it appears unnecessary to express any opinion on the nature of reference proceedings and whether the appeal filed by the Department should be deemed to be continuation of the claim that the tax was not payable by the appellant for purposes of sub-clause (a) as once the question of law was decided against the appellant by this court in 1958, may be in appeal filed by the Department, the appellant's claim that the amount was not payable by him stood finally adjudicated. Nothing more remained to be decided. The order of the Tribunal, in conformity with the order passed by this court, could be relevant for the Department, only to enable it to proceed to realise the amount. It could not stand as a bar to the claim of the appellant under section 2(m) by operation of sub-clause (a) of clause (iii). For the operation of sub-clause (b), the Revenue had to establish that the amount remained outstanding for a period of more than 12 months on the valuation date. In CWT v. Kantilal Manilal [1985] 152 ITR 447 (SC) it was held that an amount becomes outstanding after it had been quantified. The liability under the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not liable to pay any tax on the forest income. That may have resulted in wiping off the demand created initially by the Income-tax Officer. But the High Court found and it was not disputed that no order was passed by it before the law was declared by this court in 1958. The original demand thus remained outstanding and became operative after the decision of this court. Reliance was also placed on CWT v. Vadilal Lallubhai [1984] 145 ITR 7 (SC) and it was urged that, in computing the net wealth of an assessee, the deductions admissible must be calculated on the basis of the tax as finally quantified even though the assessment may have been made subsequent to the valuation date. It was urged that, even assuming that the liability arose from the order passed by this court in 1958, it having been finally quantified after the order was passed by the Tribunal, the period of 12 months should be calculated from that date. The facts of the case were entirely different. In Vadilal's case [1984] 145 ITR 7 (SC), the question was whether the deduction could be claimed on the basis of estimated liabilities mentioned in the return or the amount which is finally determined at the final assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference or not. This, admittedly, was not done by the assessee, and the amount remained outstanding throughout the period the reference was pending in the High Court. The effect of answering the reference in favour of the assessee was that he could claim refund. But that occasion could arise only if the order under section 66(5) was passed by the High Court. But, before that, the correctness of the order was challenged by the Department by filing an appeal in this court which was allowed and the liability of the appellant to pay tax was upheld. The tax assessed thus remained unpaid during the pendency of the reference in the High Court, and during the pendency of the appeal in this court and it was paid only in March, 1965. The effect of non-payment of tax under sub-section (7) of section 66 was that the tax payable became outstanding by operation of law and it remained so on the valuation date. Therefore, the bar under sub-clause (b) of clause (iii) of section 2(m) operated and the appellant could not claim the amount as deductible while computing his net wealth. It was outstanding on the valuation dates for more than 12 months whether the period is calculated from service of n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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