Decided on November 24,1965



- (1.) Kesoram Industries and Cotton Mills Limited, the appellant herein, is a company incorporated under the Indian Companies Act. Its subscribed capital at the end of the relevant accounting year ending March 31, 1957, was Rupees 2,29,99,125. The original cost of the said assets was Rs. 2,30,32,833. During the year ended March 31, 1950, the company made a revaluation of its assets and added an amount of Rs. 1,45,87,000 to the cost of the said fixed assets. After certain adjustments, the value of the fixed assets was fixed at Rs. 2,60,52,357. The said fixed assets of the assessee were shown in the balance-sheets issued by the assessee from time to time at the added value less depreciation calculated on the original cost. In the balance-sheet of the relevant accounting year also the said amount was shown as the value of the fixed assets. In the profit and loss account for the said year a sum of Rs. 15,29,855 was shown as the amount of dividend proposed to be distributed for that year. The said amount was declared as dividend at the General Body Meeting of the assessee held on November 27, 1957. The said balance-sheet as on March 31, 1957, also showed a provisions for taxation amounting to Rupees 1,03,69,009 and as against the said amount a sum of Rs. 84,76,690 was shown as the taxes paid during the said accounting year.
(2.) In computing the net wealth for the purposes of Wealth Tax Act, 1957, the Wealth Tax Officer accepted the said valuation of the fixed assets under S. 7 (2) of the said Act, rejecting the plea of the assessee that each item of the assets should be valued at the market rate under S. 7 (1) thereof. He also disallowed the claim of the assessee in respect of the proposed dividend and estimated income-tax and super-tax on the ground that the said items were not debts on the valuation date, i.e., March 31, 1957, within the meaning of S. 2 (m) of the Wealth Tax Act. On appeal, the said order was confirmed by the Appellate Assistant Commissioner except to the extent of outstanding demand of income-tax for Rs. 30,305. On further appeals, the Income-tax Appellate Tribunal Calcutta Bench "A", not only disallowed the claims of the assessee but also allowed the appeal of the Department in regard to Rs. 30,305 subject to certain directions given by it. At the instance of the assessee, the following three questions were referred to the High Court under S. 27 of the Wealth Tax Act : (1) Whether, on the facts and in the circumstances of the case, the Wealth Tax Officer was justified in taking the value of the assets of the assessee as shown in its balance-sheet on the relevant valuation date. (2) Whether, on the facts and in the circumstances of the case, in computing the net wealth of the assessee the amount of proposed dividend was deductible from its total assets. (3) Whether, on the facts and in the circumstances of the case, in computing the net wealth of the assessee, the amount of the provision for payment of income-tax and super-tax in respect of the year of account was a debt owed within the meaning of S. 2 (m) of the Wealth Tax Act, 1957, and as such a deductible in computing the net wealth of the assessee. The High Court answered the three questions against the assessee. Hence the present appeal.
(3.) Mr. Palkhivala, learned counsel for the assessee raised before us the same arguments as he had unsuccessfully pressed before the High Court. We shall take each of them seriatim for our consideration.;

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