R.K.Gulati, J. - (1.) In pursuance of the directions given under Subsection (3) of Section 27 of the Wealth-tax Act, 1957 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal has referred the following question for the opinion of this court : "Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was correct in law in not disallowing the claim for deduction of debt amounting to Rs. 43,022 under Section 2(m)(ii) of the Wealth-tax Act, 1957, in Sri Krishna Gopal Gupta's wealth-tax assessment for the year 1969-70 ?"
(2.) Briefly stated, the facts are that the assessee is an individual and the reference relates to the assessment year 1969-70. The assessee withdrew a sum of Rs. 43,022 from a firm, Messrs. Krishna Gopal Jagat Narain, where he had already a debit balance and, on the corresponding valuation date, the debit balance stood at Rs. 68,295. In the determination of "net wealth", the assessee claimed deduction of the said debit balance as debt owed by the assessee. However, the Wealth-tax Officer allowed deduction of Rs. 25,273 only and the balance amounting to Rs. 43,022 was not allowed with the narration "investment in Hindu undivided family property". In appeal, the Appellate Assistant Commissioner upheld the disallowance saying : ". . . . The debit balance of Rs. 43,022 indicates the investments made in the Hindu undivided family property after withdrawing the same...."
(3.) The assessee appealed to the Income-tax Appellate Tribunal which accepted the claim and held that the assessee was entitled to the deduction of Rs. 43,022 being the liability outstanding against the assessee on the valuation date. It is in this background that the question stated earlier has been referred to this court.;