Sikri, J. - (1.) Two questions were referred to the High Court by the Appellate Tribunal under S. 27 of the Wealth Tax Act (XXVII of 1957). We are only concerned with the second question which reads as follows: "Whether on the facts and in the circumstances of the case, in computing the net wealth of the assessee, the arrears of tax as determined as per notice under S. 18A of the Indian Income-tax Act for the two assessment years under consideration constitute a debt owed by the assessee within the meaning of S. 2(m) of the Wealth Tax Act as on the valuation date -.
(2.) The facts and circumstances of the case are as follows. Demands in respect of the payment of tax under S. 18A of the Indian Income-tax Act were made against the respondent company, M/s. Standard Vacuum Oil Co. Ltd., for the two years ending December 31, 1956 and December 31, 1957, by notices of demand dated May 28 1956 and May 31, 1957, respectively. The final instalment of the amount of Rs. 47, 69, 653 for each of the two years was outstanding on the respective valuation dates. The assessee claimed that the demand for such tax should be allowed as deduction in determining the net wealth of the assessee under the Wealth Tax Act. The Appellate Tribunal held that this sum should be deducted from the total computation of wealth if the said amount was outstanding for less than a year. It further held that the demand created under S. 18A of the Income-tax Act was a debt owed by the assessee, and it directed the Wealth Tax Officer to ascertain "whether the demand referred to in this case was outstanding for less than one year on the valuation date and if so, he will allow the same as a deduction." The High Court, following its decision in Assam Oil Co. Ltd. vs. Commr. of Wealth Tax (Central) Calcutta, (1963) 48 ITR 49 answered the question in favour of the assessee. The Revenue having obtained certificates of fitness from the High Court filed these appeals in this Court.
(3.) Mr. Viswanatha Sastri learned counsel for the Revenue, contends that on a true interpretation of S. 18A amount which is payable under it is not an ascertained amount as the amount as the assessee can estimate the amount which he should pay as advance tax. He says that the section contemplates more or less the opening of a running account between the State and the assessee and the exact amount is not finalised till the 15th of March each year, which is the last date by which the assessee has to exercise his option to pay the amount demanded or a lesser sum. He says that the debt really becomes a debt on the 15th of March when no option is exercised to pay a lesser sum. In order to appreciate the contention of the learned counsel it is necessary to consider the relevant statutory provisions first of the Wealth Tax Act and then of the Income-tax Act. Section 2(m) of the Wealth Tax Act defines "net wealth" as follows: "net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in this net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than,- (i) debts which under S. 6 are not to be taken in into account; and (ii) debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth-tax in not payable under this Act." Section 2(q) defines 'valuation date' as "in relation to any year for which an assessment is to be made under this Act, means the last day of the previous year as defined in Cl. (11) of S. 2 of the Income-tax Act if an assessment were to be made under that Act for that year". It is not necessary to set out the proviso to this definition. Section 3 is the charging section which reads as follows: "Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the first day of April, 1957, a tax (hereinafter referred to as wealth-tax) in respect of the net wealth on the corresponding valuation date of every individual, Hindu undivided family and company at the rate or rates specified in the Schedule." ;