1983 (10) TMI 3 - SC - Wealth-tax

Whether assessee is entitle to deduction of tax determined payable on the basis of assessment orders passed after valuation date and created as a result of rectification order passed after valuation date - questions set forth earlier must be answered in favour of the assessee and against the Revenue

Summary

Issues:
1. Deduction of tax liabilities for various assessment years in determining net wealth.
2. Claiming deduction for tax liabilities created after the valuation date in the computation of net wealth.

Analysis:
The case involved an appeal against the Gujarat High Court's judgment regarding the deduction of tax liabilities for different assessment years in determining the net wealth of an assessee. The respondent-assessee claimed a deduction of tax liabilities for specific years in the computation of her net wealth for the assessment year 1964-65. The WTO rejected the claim, but the AAC allowed it, remanding the case to verify the accuracy of the deductions. The Appellate Tribunal rejected the contention that the deductions should be based on returns filed, not assessment orders, citing relevant judgments. Additionally, the claim for tax liabilities created post-valuation date was disputed. The High Court relied on precedent and answered both questions in favor of the assessee.

Regarding the first issue, the Supreme Court referred to a previous judgment and affirmed the High Court's decision, concluding that the assessee was entitled to the deduction of tax liabilities for various assessment years in determining net wealth. On the second issue, the Court examined the timing of rectification orders for tax liabilities post-valuation date. The Court emphasized that an appeal before the AAC constitutes a continuation of the assessment proceeding, allowing claims even if liabilities arose after the original assessment. The Court held that rectification orders quantifying tax liabilities must be treated akin to original assessments for deduction purposes, as they crystallize the true tax liability existing on relevant dates.

In conclusion, the Supreme Court upheld the High Court's decision, answering both questions in favor of the assessee and against the Revenue. The appeal was dismissed, with no order as to costs. The Court's ruling emphasized the treatment of tax liabilities, including those arising post-valuation date, in determining an assessee's net wealth, providing clarity on the admissibility of deductions based on rectification orders and assessment proceedings.