AJIT K.SENGUPTA,J. - (1.) IN this reference made at the instance of the assessee, the following question of law has been referred by the Tribunal to this Court under s. 27(1) of the WT Act, 1957 : "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in its decision that income-tax refunds determined after the valuation date should be considered as an asset for inclusion in the net wealth as oil the valuation date ?"
(2.) THIS reference relates to the assessment for the assessment year 1974-75 corresponding to the valuation date 31st March, 1974. During the material time, the assessee was a director of Duncan Brothers and Co. Ltd., from where he drew salary. The assessee also had income from other sources such as dividend, interest and director's fees, etc. He was also a partner in the firm styled "Badridas Keshav Prosad". The assessee claimed substantial income-tax refunds on account of taxes deducted at source. Most of these refunds had not been determined and/or quantified on the valuation date corresponding to the assessment under reference since the income-tax assessments for the relevant years had been completed long after the valuation date. The, assessee claimed that these refunds having not been determined so far, could not be included in his net wealth. The Tribunal, however, held that the refunds could be considered as actionable claims as on the valuation date and, therefore, were includible in the net wealth. This issue has recently been decided by the Rajasthan High Court in CIT vs. Rangnath Bangur (1985) 152 ITR 71 as well as by the Gujarat High Court in CWT vs. Arvindbhai Chinubhai (1982) 133 ITR 800. It has been held that tile mere possibility of getting an income-tax refund in future as and when the assessment proceedings are to be finalised would not form part of an asset of an assessee belonging to him on the valuation date. The future possibility of getting a refund either of advance tax paid / or taxes deducted at source would represent a mere chance to get an asset in future, may be, years after the valuation date.
(3.) THIS was a mere possibility and could not, therefore, be treated as an asset on the valuation date. It would be impossible to comprehend or predict with any degree of certainty as to what would be the actual amount of tax refund, if any, which would be available to the assessee in future and which could be treated as his asset as on the valuation date. It is, however, to be noticed that the Supreme Court in a series of cases has held that the tax liability as finally assessed, in spite of the uncertainty as to such quantification on the valuation date, shall relate back as an allowable debt on the valuation date. The mere fact that the computation of tile quantum of tax takes place years after the valuation date has been held to be immaterial. This applies even when the tax liability is enhanced by way of rectification. (See CWT vs. Vadilal Lallubhai (1984) 145 ITR 7 (SC)).;