Law:

Section:

Section 2(m) of the Wealth-tax Act, 1957 - Net wealth-Debt owed - Assessment year 1957-58 - Whether amount provided by assessee for payment of income-tax and super-tax was deductible in computing its net wealth - Held, yes - Whether amount of proposed divided being not an existing liability of assessee was not deductible in computing its net wealth - Held, yes - Whether amount being demand payable as result of orders and findings of Investigation Commission represented existing liability of assessee, and as such, was deductible in determining its net wealth - Held, yes FACTS For the assessment year 1957-58, the assessee claimed deduction in respect of tax liabilities, proposed dividend and balance of the demand as a consequence of findings and orders of the Income-tax Investigation Commission. The ITO and the AAC did not accept these claims. Upon further appeal by the assessee, the Tribunal accepted the first claim partially. The second and third claims advanced for the assessee were rejected by the Tribunal. On reference: HELD Following the decision of the Supreme Court in the case of Kesoram Industries & Cotton Mills Ltd. v. CWT [1966] 59 ITR 767: [1966] 2 SCR 688 (SC), it was held that the amount provided by the assessee for payment of income-tax and super-tax was deductible in computing the net wealth of the assessee. As regards the proposed dividend, on the valuation date there was merely a proposal that a sum should be distributed as dividend. There was no existing liability. Consequently, the proposed dividend was not deductible in computing the net wealth of the assessee. As regards the amount of demand payable as a result of certain orders and findings of Investigation Commission, following the decision of the same High Court in the case of J.K. Cotton Mfrs. Ltd. v. CWT (WTR No. 327 of 1964), it was held that the amount represented an existing liability of the assessee. The amount was, therefore, deductible in determining the net wealth of the company. Note: The case has been decided partly in favour of the assessee and partly in favour of the revenue. CASES REFERRED TO J.K Cotton Manufacturers Ltd. v. CWT [1971] 80 ITR 34 (All.), Kesoram…

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