G.K.Mitter, J. - (1.) This is a reference under Section 27 (1) of the Wealth Tax Act.
(2.) The assessee company was assessed to Wealth Tax for the assessment year 1957-58 as a non-resident company. In its return it showed its net wealth as valued at Rs. 5,46,26,050/- as on December 31, 1956 being the valuation date taking into account a sum equivalent of 2,486,180 representing the amount owing for taxation as on December 31, 1956. The Wealth Tax Officer allowed the said deduction but the Commissioner of Wealth Tax, in exercise of power under Section 25(2) of the Wealth Tax Act disallowed the same increasing the net wealth by 2,486,180. The assessee appealed to the appellate tribunal taking a supplementary ground, namely, that the last instalment of Rs. 47,86,2O7/- of the demand made under Section 18A(1) of the Indian Income Tax Act which remained outstanding on the valuation date should be allowed as a deduction in the computation of the net wealth. The assessee's contention was two-fold : (a) provision for taxation on the amount of the income as at December 31, 1956 was a debt owed by the company and therefore the entire amount should be deducted in arriving at the net wealth. (b) in any event the last instalment of the demand made under Section 18A (1) of the Indian Income Tax Act should be deducted from the total valuation in computing the net wealth.
(3.) The Tribunal rejected the first contention holding that there was no debt owed by the assessee in the absence of quantification and ascertainment of the same due as tax. With regard to the second ground it held that debts outstanding for not more than 12 months should be allowed as a deduction and the demand created under Section 18A was a debt owed by the assessee. It directed the Wealth Tax Officer to ascertain whether the demand referred to in this case was outstanding for less than one year and if so he should allow the same as a deduction.;