TMI Blog1996 (4) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... N J.--- The assessee, Raja Vishwanath Pratap Singh, is the son of the late Captain Raja Bahadur Ram Gopal Singh, who was the owner of extensive zamindari and other properties. Ram Gopal Singh ran into debts. He applied under section 4 of the Uttar Pradesh Encumbered Estates Act, 1934, for the liquidation of his debts. While his application under section 4 was pending, Ram Gopal Singh passed away and his estate was taken over by the Court of Wards on September 16, 1941. The estate was released on February 16, 1953. All the proceedings pursuant to the application before the special judge after the death of Ram Gopal Singh went on in the name of the assessee. Out of the savings of the estate, the Court of Wards invested an amount of Rs. 6,11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated March 25, 1961, came to the knowledge of the Department that the decree-holders could not proceed against the amount of Rs. 6,87,000 and odd held by the assessee in his own name for recovery of the decretal debt, the Wealth-tax Officer initiated proceedings under section 17 of the Wealth-tax Act, 1957, against the assessee for the assessment years 1957-57, 1958-59 and 1959-60. After giving a hearing to the assessee, the assessments were completed by the Wealth-tax Officer for the aforesaid years of assessment holding that since the decretal amount of Rs. 30,00,000 could not be recovered from the assessee personally, it was not a debt owed by the assessee. The sum of Rs. 6,78,000 constituted the net wealth of the assessee against whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the assets of the assessee as "debts owed" by the assessee. The payability of the debt was not very material for this purpose. For this proposition, reliance was placed upon the judgment of this court in the case of Kesoram Industries and, Cotton Mills Ltd. v. CWT [1969] 59 ITR 767. It was further argued that a decree could not be passed against a dead person. The decree in question was actually passed against the assessee. Therefore, it could not be said that no decree was passed against the assessee personally. The Tribunal rejected all these arguments. The Tribunal held that in order to get any deduction of any amount on "debt owed" by the assessee, it will have to be shown that he was personally liable to pay the debts. In a case w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misunderstood the true nature of the obligation of the heir of a deceased debtor to pay his debts. The High Court referred to Mulla's Hindu Law, 12th edition, page 426, and observed that the assessee was liable to pay the debts incurred by his deceased father. But his liability was restricted to the extent of the property inherited by him from his deceased father. So his father's debts which may be satisfied from the property which he had inherited from his father were "debts owed by the assessee". The High Court, therefore, answered the first question by holding that the debt amount to Rs. 30,00,000 and odd should have been allowed as a deduction in calculating the net wealth of the assessee. As a consequence of the answer given to the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ascertainable sum of money. Debitum in praesenti solvendum in futuro. In that case, the question was whether liability to pay income-tax which had not been computed by an assessment order could be treated to be a present liability and, therefore, a debt. This court held that the liability to pay income-tax arose by virtue of the Income-tax Act. At the end of the accounting period there was a perfected debt. This was not a contingent liability. It was a present liability to pay an ascertainable amount in futuro. Therefore, it came within the meaning of the phrase "debts owed" in section 2(m) of the Wealth-tax Act on the valuation date. This decision does not come to the aid of the assessee in any way. Under the Wealth-tax Act, "net wealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Pradesh Encumbered Estates Act and also the judgment of the High Court passed on March 25, 1961. It was argued that the judgment must be understood in the context of the provisions of that Act. It was emphasised that there was a pious obligation of the assessee to pay off the debts incurred by his father. This argument had been advanced before the Appellate Assistant Commissioner, but was not pressed before the Tribunal. Moreover, the obligation of the son to pay off the debts contracted by his father is limited to the properties inherited by the son from his father. It is not the case of the assessee that he has inherited the amount of Rs. 6,87,000 held in Government securities from his father. In any event, it was held by the High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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