Law: Wealth Tax Act, (XV of 1963)

Section: 2(m)

Law: Income Tax Ordinance, 1979

Section: 136(6)

Law: Wealth Tax Rules, 1963

Section: 8

JUDGMENT Shahid Jamil Khan, J:- Following question of law is referred, on the instance of applicant assessee, for our opinion, which is asserted to have arisen out of order dated 12.03.1995 passed by erstwhile Income Tax Appellate Tribunal ("Appellate Tribunal"):- "Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the unadjusted advance rent of Rs.3,00,000/- was not a 'debt owed' within the meaning of Section 2(m) of the Wealth Tax Act, 1963, when the amount was refundable in the event of premature termination of the lease by the lessee?" 2. Facts as found by Appellate Tribunal are that assessee had received advance rent for five years against a property offered for wealth tax. The advance rent was to be adjusted against monthly rent. The assessee claimed unadjusted rent as liability in wealth tax return and sought deduction of amount from gross wealth of the assessee. Wealth Tax Officer refused to treat the unadjusted advance rent as loan within the meaning of Section 2(m) of the Wealth Tax Act, 1963 ("Act of 1963"). First Appellate Authority treated the advance rent as loan and accepted assessee's appeal. On further appeal, Appellate Tribunal agreed with the findings of Wealth Tax Officer and refused to treat the advance rent as loan adjustable as loan/debt. Appellate Tribunal through an elaborate order, discussed and distinguished the judgments relied upon by assessee and arrived at following conclusion:- "11. It is also pertinent to point out that the learned AR of the assessee in his arguments has contended that advance rent could be best considered a contingent liability and it could be deducted from the assets of the assessee while calculating the net wealth. In the reported case 1988-PTD(Trib)-585 the learned Members while discussing the contingent liabilities also discussed the case reported as (1967)-63-ITR-470 (Standard Mills Vs. CWT Bombay (India) S.C. The Lordships of the Indian Supreme Court have held "that gratuity payable on termination of employment was a mere contingent liability which arose only when the employment of an employee was terminated by the death or other in-capacity, retirement or…

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