K.AGRAWAL, J. - (1.) THE Tribunal, Allahabad, has referred the following question of law under s. 27(3) of the WT Act, 1957 (hereinafter referred to as 'the Act'), for opinion to this Court : "Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the unpaid income -tax liability was not allowable as a debt within the provisions of WT Act, 1957 -
(2.) BRIEFLY stated, that the facts giving rise to the present reference are as follows : he applicants are HUFs and the assessment relates to the asst. yr. 1976 -77 for which the relevant valuation date is HUF) and Rs. 5,33,965 (Ram Narain, HUF) as income -tax liabilities, which had been incurred upto 1972 -73. The WTO refused to allow deduction of these liabilities in view of the provisions of s. 2(m)(iii)(b) of the Act since more than 12 months had expired from the relevant valuation date and the liability had remained outstanding. He also disallowed a sum of Rs. 1 lakh paid as penalty which was imposed by the CCE for violation of the Gold Control Act, 1968. In appeal, the AAC did not accept the plea of the applicants regarding allowance of the liability towards income -tax. However, he allowed the deduction of Rs. 50,000 each towards penalty under the Gold Control Act, 1968. The applicants as well as the Department took up the matter before the Tribunal. The Tribunal has upheld the order passed by the AAC.
(3.) WE have heard Sri Shashikant Gupta, learned counsel for the applicants and, Sri Dhananjay Awasthi, learned standing counsel for the Revenue. Learned counsel for the applicants submitted that the liability of income -tax was created on the basis of settlement income -tax liability remained unpaid and, therefore, it had been allowed as deduction. Learned standing counsel, however submitted that in view of the provisions of the s. 2(m)(iii)(b) of the Act as the liability towards income -tax was outstanding for the period of more than 12 months on the valuation date, it could not be allowed.;