Law:

Section:

Section 2(m)(iii) of the wealth-tax act, 1957-Net wealth-Debt owed-Outstanding income-tax liability-Certain or wealth-tax assessments reopened as a consequence of income-tax settlement arrived at between assessee and department resulting in demand-assessee claimed in said assessment years deduction of income-tax liabilities while computing net wealth-whether tribunal right in holding accepting assessee's claim that income-tax liabilities, though quantified later, were very much in existence and were debt owed deductible under section 2(m)(iii)-Held, on facts, yes Facts As a result of the search made of the business premises of a firm in which the assessee was a partner, and the consequent settlement with the department, the income-tax assessments of the assessee were reopend and demand created in respect of assessment years 1956-57 to 1966-67. At the same time, in view of the settlement, the wealth-tax assessments of the assessee for the assessment years 1965-66 and 1966-67 were reopend under section 17. The assessee claimed deduction of the aforesaid income-tax liabilities for the assessment years 1956-57 to 1966-67 while computing his net wealth. The WTO rejected the claim and completed the reassessment. On appeal, the AAC agreed that income-tax liabilities were deductible even though they were quantified much later but allowed the benefit in respect of the assessment years 1964-65 to 1966-67 only. On further appeal, the Tribunal while concurring with the AAC's observations, held that clause (iii) of section 2(m) was not applicable because the order creating the income-tax liabilities had not been passed on the relevant valuation dates. Accordingly, the Tribunal allowed the assessee's claim in respect of tax liability of the earlier assessment years, viz., 1956-57 to 1963-64, also. On reference: Held According to section 2(m ), "net wealth" represented the amount by which the aggregate value of all the assets of the assessee on the relevant valuation date was in excess of the aggregate value of all the debts owed by him on such date. The Supreme Court, in case of Kesoram Industries & Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 , laid down that a debt is a…

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