TMI Blog1967 (8) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 and it is not also disputed that notice under section 7 of the Public Demands Recovery Act, 1913, was served on the assessee and that recovery proceedings were pending on the relevant valuation dates. The Wealth-tax Officer disallowed the assessee's claim for deduction of the said amount from the net wealth. An appeal preferred by the assessee, against the assessment order, before the Appellate Assistant Commissioner also failed. Thereafter, the assessee appealed before the Appellate Tribunal, which allowed the claim of the assessee in respect of the sum of Rs. 28,37,282, with the following observations : As soon as the Income-tax Officer treats an assessee as in default and forwards to the Collector a certificate under his signature for recovery of the amount of arrears due from the assessee under section 46(2), the amount specified in such certificate becomes recoverable as if it were an arrear of land revenue. Upon such certificate being issued, the assessee becomes a certificate-debtor and the amount specified in the certificate becomes a certificate-debt recoverable as an arrear of land revenue under the Public Demands Recovery Acts, in force in the relevant area. In o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equity only and there is nothing in the Constitution limiting or affecting the powers of the legislature in regard to the allowance or disallowance of such deductions. Section 2(m)(iii) is, therefore, evidently within the legislative competence of the Parliament and it does not offend against the provisions of entry 86 of the Constitution." Dissatisfied with the order of the Tribunal the revenue sought for a reference of the point of law, involved in the case, before this court, under section 66(1) of the Indian Income-tax Act. The assessee wanted that the question should be in the following form : " Whether, on the facts and in the circumstances of the case, the amount of Rs. 28,37,282-8-0 being the amount in respect of which certificates have been filed under the Public Demands Recovery Act and notices under section 7 of the Public Demands Recovery Act, 1913, had been served, is deductible from the value of the immovable assets of the assessee for the purpose of computing the net wealth of the assessee ? " The Tribunal, however, did not refer the question in that form. Instead thereof the following two questions were referred to this court : " (1) Whether, on the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des of recovery prescribed of which one is recovery under the provisions of the Public Demands Recovery Act. We need not concern ourselves, in this reference, with all the provisions for recovery of income-tax prescribed by section 46. We, therefore, set out below that portion of section 46 which deals with recovery of income-tax, by the procedure prescribed by the Public Demands Recovery Act : " 46. (1) When an assessee is in default in making a payment of income-tax, the Income-tax Officer may in his discretion direct that, in addition to the amount of the arrears, a sum not exceeding that amount shall be recovered from the assessee by way of penalty. (1A) For the purposes of sub-section (1), the Income-tax Officer may direct the recovery of any sum less than the amount of the arrears and may enhance the sum so directed to be recovered from time to time in the case of a continuing default, so however that the total sum so directed to be recovered shall not exceed the amount of the arrears payable. (2) The Income-tax Officer may forward to the Collector a certificate under his signature specifying the amount of arrears due from an assessee, and the Collector, on receipt of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that the amount of income-tax assessed may become due after demand is made under section 29 and section 45 of the Indian Income-tax Act and may thereafter become a debt due to the Crown, realisable under the Public Demands Recovery Act. But because it becomes a debt, it does not lose its character as an arrear of revenue and since for realisation or collection of such revenue, the Court of Small Causes, Calcutta, is not the proper forum, that court has no jurisdiction to entertain the claim in view of section 19 of the Presidency Small Causes Courts Act which debars that court from entertaining suits concerning the assessment, or collection of revenue. This court further observed with reference to the provisions of section 46(2) of the Indian Income-tax Act : " The aforesaid provisions of law relate to the mode of recovery of taxes. But, because the mode is the same as the mode of recovery of land revenue and because the arrear of income-tax becomes debt to the Crown when due, such tax does not lose its character as arrear due by way of revenue." The above decision is an authority for the proposition that if income-tax dues, assessed and demanded, be not paid by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Recovery Act, an income-tax demand ceased to be an income-tax debt and changed over to a certificate debt recoverable in the manner prescribed by the Public Demands Recovery Act. We do not find any force in this contention of Dr. Pal. We have already referred to the authorities which go to establish that, in spite of the fact that an income-tax debt is enforced by the procedure prescribed under section 46(2) of the Indian Income-tax Act, read with the provisions of the Public Demands Recovery Act, it does not lose its original character of tax payable under the law relating to taxation of income. If no change in its character takes place, because proceedings under the Public Demands Recovery Act have been initiated, then the provision of sections 2(m)(iii)(b) become applicable to such demand. Dr. Pal made a desperate attempt to argue that, even if the tax demand be not deductible by reasons of the provisions of section 2(m)(iii)(b) of the Wealth-tax Act, even then section 8 of the Public Demands Recovery Act makes the debt charged on the property and reduces the value of the net wealth. He submitted that this aspect of the matter was not considered by the Appellate Tribunal and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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