TMI Blog1967 (8) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... e three questions, the first is : " Whether, on the facts and in the circumstances of the case, the sum of Rs. 1, 15,768, representing the balance of tax for the year ending December 31, 1954, and the sum of Rs.3,18,129, representing the balance of tax for the year ending December 31, 1957, are allowable deductions in the computation of the net wealth under the Wealth-tax Act ?" This and the other two questions, which we shall presently reproduce, turn on whether the taxes for which provision has been made in the assessment year are debts owed by the assessee under section 2(m) of the Wealth-tax Act, 1957. That term is defined to mean the aggregate value of the assets owed by the assessee on the valuation date, which is in excess of the aggregate value of the debts owed by him on that date. The computation of the aggregate value of the assets, as well as the debts owed by the assessee, has to be made in accordance with the provisions of the Act. Clause (m) of section 2 mentions three categories of debts, which will be excluded from the aggregate value of debts. These three items will not be regarded as debts owed by the assessee on the valuation date. We are, in the present cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded December 31, 1954, was ascertained and that has also been paid within six months of the date of the order. The revenue, however, says that the amendment of 1964 came subsequent to the order of the Tribunal, which is dated August 26, 1963, and that the Tribunal had, therefore, no occasion to consider the assessee's claim under section 35(2). But we think the question does arise from the order of the Tribunal, though of course it had no opportunity to consider the question from the point of sub-section (2). The further point of the revenue is that even so the assessee's remedy lay by an independent application to the Wealth-tax Officer to rectify the mistake. There appears to be some support for this view to be derived not merely from the language of sub-section (2), but also from the succeeding sub-sections. Sub-section (5) clearly says that where an amendment is made under section 35, an order shall be passed in writing by the wealth-tax authority concerned or the Tribunal, as the case may be. The Tribunal may be competent to make the order in an appeal arising out of the order of the Wealth-tax Officer on the question of rectification of a mistake or a deemed mistake. Under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y became effective not later than the year of account. The learned judge was of opinion that the liability did not give rise to any obligation to pay a sum of money either determined or determinable in the light of factors existing on that date, for, the liability to pay tax arose only when the Finance Act became operative on the first day of April of the assessment year either by the enactment of an Act or by reason of section 67B of the Income-tax Act, 1922. Having regard to the majority view, it was to be taken as settled that liability to income-tax as on the valuation date, the exact quantum of which is determinable after that date, is deductible in computing the net wealth as on such date of valuation. It follows that the first part of the first question should be answered in favour of the assessee, but we must point out that the effect of this is that the assessee will have to seek his remedy independently under section 35(2). The second part of the first question is directly covered by Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax. This amount was disallowed by the Tribunal on the ground that the assessment for 1958-59 was completed only on Januar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision made for tax payable under section 23A where no order under section 23A had been passed before the valuation date is an allowable deduction in the computation of the net wealth." The sum involved in this question is Rs. 12,68,797. Deduction of this amount was disallowed by the Tribunal on the view that, before an order was passed under section 23A, the liability to tax under that section could not be said to have ripened into a debt. For the assessee it is argued that a liability under section 23A is not distinguishable from liability to income-tax or super-tax, personal or corporate. We are told the liability to pay additional super-tax under section 23A springs not from the order which the Income-tax Officer may make, but from section 23A itself. This view is vigorously countered by Mr. Balasubrahmanyan, for the revenue, who relies strongly on M. M. Parikh, Income-tax Officer v. Navanagar Transport and Industries Ltd., and contends that, in view of this decision, the question is concluded in favour of the revenue. Section 23A confers power to assess companies to additional super-tax on undistributed income in certain cases. It appears that in most tax systems of advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of section 23A we are unable to accept the contention for the assessee. The structure of section 23A and the manner in which the liability to additional super-tax arises thereunder leave no room for doubt that the liability is not charged automatically by statutory force but arises only from an order of the Income-tax Officer, which he will make only after consideration of and decision on various factual factors to be found by him. That appears to be the view in M. M. Parikh, Income-tax Officer v. Navanagar Transport and Industries Limited. It is true that the primary question decided there was whether an order under section 23A was an order of assessment within the meaning of section 34(3). Learned counsel for the assessee argues that the decision is an authority only for that proposition. In our opinion, it is impossible to agree with him. A decision on the main proposition does involve the consideration as to how the liability under section 23A arises in contrast under sections 3 and 4. Dealing with that matter the Supreme Court says thus : " There is however a vital difference between the assessment of tax under section 23 and imposition of liability under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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