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1966 (10) TMI 40 - SC - Income TaxWhether, on the facts and circumstances of the case, in computing the net wealth of the assessee under section 7(2) read with section 2(m) of the Wealth-tax Act, the liability for income-tax and business profits tax could be allowed as a deduction ? Whether the liability in the sum of ₹ 25,02,675 which arose as a result of the awards dated 28th October, 1948, 28th November, 1956, and 17th October, 1954, before the valuation date or any part thereof is allowable as a deduction in determining the net wealth of the assessee under section 7(2) read with section 2(m) of the Wealth-tax Act ? Held that:- Liability to pay income-tax was a present liability though the tax became payable after it was quantified in accordance with ascertainable data : there was therefore a perfected debt at any rate on the last day of the accounting year and not a contingent liability, and the amount of the provision for payment of income-tax in respect of the year of account was a " debt owed " within the meaning of section 2(m) on the valuation date and was as such deductible in computing the net wealth. The view expressed by the High Court on the second question, in so, far as it relates to provision for income-tax, cannot therefore be sustained and that part of the question should be answered in the affirmative. The true function of section 7(2)(a) of the Wealth-tax Act was not appreciated. Section 7 does not deal with the computation of net wealth. It deals with the computation of the aggregate value of the assets. Under section 7 the Wealth-tax Officer is competent, where the assessee is carrying on business of which accounts are maintained regularly, to determine the net value of the assets of the business as a whole. But in doing so he determines the value of the assets of the business as a whole, and not the net wealth of the business. Appeal partly allowed.
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