Law:

Section:

Section 2(m) of the Wealth-tax Act, 1957-Net wealth-Debt owed-Whether income-tax payable on concealed income disclosed by assessee under section 68 of the finance act, 1965 is deductible under section 2(m)-Held, yes-Whether aforesaid liability to tax arose not under the finance act, 1965 but under section 4 of the income-tax act, 1961-Held, yes Facts The assessee made a disclosure, pursuant to section 68 of the Finance Act, 1965, of Rs. 7,00,000 which had been shown in his books as having been covered by hundi transactions with firm A. Along with the declaration, the assessee filed a statement that this concealed income had been earned by him during the assessment year 1957-58 to 1964-65. The income-tax on the aforesaid concealed income was duly paid in accordance with section 68 of the aforesaid Finance Act. The WTO, thereafter, reopened the assessee's assessment for the aforesaid assessment years on the ground that he had reason to believe that certain wealth of the assessee had escaped assessment during the said years and that his belief was founded on the disclosure made by the assessee under section 68 of the Finance Act, 1965. Since the peak cash credits during the aforesaid assessment years showed that the assessee had substantial sums with him, in the years in question, which constituted his taxable wealth, the assessee filed his wealth-tax returns. He, however, claimed the deduction of income-tax paid by him on the aforesaid concealed income. The WTO negatived his claim since the assessee in his balance sheet had not shown the liability to pay income-tax. The assessee's appeal before the AAC was unsuccessful. On second appeal, the Tribunal held that the deduction claimed by the assessee should be allowed since it was in respect of a liability which was in truth and substance a liability under section 3 of the Indian Income-tax Act, 1922/section 4 of the Income-tax Act, 1961 and not a new liability created by the Finance Act, and, therefore, it constituted a "debt owed" by the assessee on the respective valuation dates within the meaning of section 2(m). The High Court, however, set aside the Tribunal's order holding, inter alia, that a new charge was…

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