TMI Blog1962 (12) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... x due and payable on the valuation date as per notice of demand under section 29, Indian Income-tax Act ₹ 2,56,762 3. Estimated reserve for liability to pay income-tax not assessed on the valuation date, but for which provision was made by the assessee in anticipation of a future liability. ₹ 20,45,384 The Wealth-tax Officer, Madras, disallowed the deduction claimed and computed the net wealth of the assessee at ₹ 92,95,104. The assessee preferred an appeal to the Appellate Assistant Commissioner. The appellate authority held that the income-tax demanded due under section 18A aggregating to ₹ 10,22,463 was not deductible as the assessee could repudiate it by submitting its own estimate of income under section 18A(2). With regard to the claim for deduction of ₹ 2,56,762 demanded from the assessee under section 29 of the Act, the appellate authority held that it was not a debt owed by the assessee as the collection of the amount was postponed due to the claim made by the assessee for relief under double income-tax relief. Regarding the sum of ₹ 20,45,384, the Assistant Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the present case, in order to determine whether the claim of the assessee for deduction of the amounts is well founded. The definition of net wealth (section 2(m)) is the most important provision and that reads: '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; and (ii) debts which are secured on, or, which have been incurred in relation to, any asset in respect of which wealth-tax is not payable under this Act. This was the provision as it stood before its amendment in 1959. Act XII of 1959 amended the section. The amending Act states that the amendment shall be made and shall be deemed always to have been made. By reason of the amendment the word and between clause (i) and clause (ii) and clause (iii) was inserted. The inserted clause re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he individual otherwise than for adequate consideration and other assets specified as enumerated in that section. Section 4 lays down what assets have to be included in the net wealth of an individual. Section 5 is the exemption provision and that states what assets shall not be included in the net wealth. Under section 6 of the Act, assets and debts outside India, under certain circumstances, shall not be taken into account. The mode of valuation of the assets is prescribed under section 7 of the Act. That reads: (1) The value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date. (2) Notwithstanding anything contained in sub-section (1)- (a) where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may, instead of determining seperately the value of each asset held by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business as on the valuation date and making such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fair prospect of maturity into a debt in future and still in its embryo stage would not answer the description of a debt. Till it is born it is not a debt. Every kind of liability immature, formative and in the course of evolution, to become a debt, cannot be called a debt in anticipation of the ultimate. The normal conception of a debt is that what it is held to be in Sabju Sahib v. Noordin Sahib [1898] I.L.R. 22 Mad. 139. This was a case where a son of a deceased partner of a firm sued the surviving partners for an account of the profits and assets of the partnership, and for payment to him of the amount which might be found due to the share of the deceased father. The plaintiff had neither letters of administration nor a succession certificate. The point in issue was whether the plaintiff was entitled to maintain that suit without letters of administration or succession certificate. It was held by a Bench of three learned judges that the claim in the suit being for an unliquidated amount was not a debt within the meaning of the Succession Certificate Act of 1889. At page 143, Subramania Aiyar J. observed as follows: The liability arising from this obligation cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney which is now payable or will become payable in the future by reason of a present obligation, debitum in praesenti, solvendum in futuro. An accruing debt, therefore, is a debt not yet actually payable, but a debt which is represented by an existing obligation.....The result seems to me to be this: you may attach all debts, whether equitable or legal; but only debts can be attached; and moneys which may or may not become payable from a trustee to his cestui que trust are not debts. The Supreme Court dealt with the true nature of a contingent debt in C.A. Nos. 319 and 320 of 1961 (Shanti Prasad Jain v. Union of India [1963] 33 Comp. Cas. 231 (S.C.). Venkatarama Aiyar J., delivering the judgment of the court, stated the position thus: The law is thus well settled that a contingent debt is no debt until the contingency happens, and as the right of the appellant to the amounts in deposit in his name in the Deutsche bank arises only on the happening of the contingencies already mentioned, it follows that there is no debt due to him in praesenti and there could be no loan thereof within section 4(1) of the Act. The Act referred to in that case is the Foreign Exchange Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to us where it was attempted to attach unliquidated damages. But in such cases there is no debt at all until the verdict of the jury is pronounced assessing the damages and judgment is given. Here there is a debt, uncertain in amount, which will become certain when the accounts are finally dealt with by the insurance committee. Therefore there was a 'debt' at the material date, though it was not presently payable and the amount was not ascertained. It is not like a case where there is a mere probability of a debt, as, for instance, where a person has to serve for a fixed period before being entitled to any salary, and he has served part of that period at the time the garnishee order nisi is served. In such a case there is no 'debt' until he has served the whole period. Against this view of the learned Lord Justice it is interesting to note the view of Hallett J. in Seabook Estate Co. Ltd. v. Ford [1919] 2 All E.R. 94. The facts, in that case were as follows. A debentures holder of a limited company appointed a receiver and manager of the premises charged by the debentures. The receiver find returns of receipts and payments for two periods of six months endi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act must be given their ordinary and natural signification and decisions and opinions of judges upon the language of other Acts are an unsafe guide. Now we have to turn to the provisions of the Indian Income-tax Act to ascertain when a tax liability emerges into a debt due to the revenue. Under this Act, it is perfectly clear that the tax liability becomes a debt due only after a notice of demand under section 29 is served on the assessee. This section requires the Income-tax Officer to serve upon the assessee or other person liable to pay the tax a notice of demand in the prescribed form specifying the sum payable. If the assessee fails so pay the amount demanded within the time and at the place and to the person mentioned in the notice he shall be at deemed to be in default. It is however open to the Income-tax Officer to treat the assessee as not being in default when he has presented an appeal against the order of assessment. When an assessee is in default in paying the tax levied, the Income-tax Officer may direct the recovery of that amount by forwarding to the Collector a certificate under his signature specifying the amount of arrears due from the assessee; the Collecto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Bengal Finance (Sales Tax) Act, 1941, Chakravartti C.J. of the Calcutta High Court stated in Recols (India) Ltd., in re [1953] 4 S.T.C. 271; A tax debt is due and payable only when it has been ascertained, quantified and notified to the assessee with a demand for payment and that seems to me to be the effect of the Sales Tax Act itself, as much as of the Income-tax Act. In Joint Official Liquidations of P.J. Bank of v. Commissioner of Income-tax [1954] 25 I.T.R. 140 the question arose whether the advance income-tax demanded from a company under section 18A of the Indian Income-tax Act is a tax falling within section 230(1)(a) of the Indian Companies Act in respect of which the State has got a right of priority over other debts. A Division Bench of this court, Rajamannar C.J. and Venkatarama Aiyar J., held that it was a tax. In that case it was common ground that there was a demand of the advance tax within the prescribed period. At page 147, the learned Chief Justice observed thus: That question is whether the amount for which a demand has been issued and which we have already held is in the nature of a tax is due from the company at the date of the windin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
