- (1.) THIS reference has been made under r. 61-A of the Rules of the High Court of Judicature for Rajasthan, 1952 as the Judges constituting the Division Bench were equally divided in their opinion as to the interpretation of the provisions of S. 2(m) of the WT Act, 1957 ('the Act'). The question referred for the opinion reads as under: "Whether determination of the tax liability by the Settlement Commission on 17th March, 1979 in respect of the asst. yrs. 1968-69 to 1973-74 could be claimed under S. 2(m) of the WT Act in the asst. yr. 1975-76?"
(2.) THE answer to this question referred for opinion, depends upon the interpretation of S. 2(m)(iii) (a) and (b). For adjudicating the controversy it is necessary to look into the facts of the case and to consider the relevant provisions of the Act. Kamal and Co., Jaipur, of which the assessee was a partner, in its balance sheet, as on 31st March, 1975 showed the liability of the sales-tax surplus as Rs. 5,54,716. This amount of the sales tax surplus was brought forward from the earlier years of 1968-69 to 1973-74. The share of the assessee in the sales tax surplus was Rs. 2,42,919. This sales tax surplus was not shown as the income either in the original income-tax return or in the reassessment proceedings, for the earlier years. The assessee subsequently moved a settlement petition before the Settlement Commission. The Settlement Commission, by its order dt. 17th March, 1979, assessed the liability of the assessee for the asst. yrs. 1968-69 to 1973-74 and worked out the total income-tax liability of the assessee to the tune of Rs. 2,38,447. The total tax liability of the assessee worked out the total income-tax liability of the assessee to the tune of Rs. 2,38,447. The total tax liability of the assessee worked out by the Settlement Commission, was Rs. 4,963 for the year 1968-69, nil for the years 1969-70 and 1970-71, Rs. 58,774 for the year 1971-72, Rs. 1,26,726 for the year 1972- 73 and Rs. 46,448 for the asst. yr. 1973-74. The assessee paid Rs. 57,712 and the liability of Rs. 1,85,207 remained outstanding. The assessee, for the asst. yr. 1975-76 claimed deduction under s. 2(m) on this amount on the ground that the income-tax liability, as a result of the order of Settlement Commission, is a 'debt owed' by the assessee and is an allowable deduction under S. 2 (m) for computing the net wealth of the assessee. The Tribunal, Jaipur Bench, refused to allow this deduction on the ground that the assessee, in the appeal, had disputed the liability for the asst. yr. 1973-74 and the debt is outstanding for a period of more than twelve months on the valuation date and, therefore, the provisions of S. 2(m)(iii)(a) and (b) are attracted and the assessee is not entitled to any deduction.
(3.) SEC . 3 of the Act is a charging section. It imposes a charge for tax in respect of the net wealth on the corresponding valuation date at the rate specified in the Schedule. The 'valuation date', according to S. 2(q) means the 'last day of the previous year' as defined in S. 3 if the assessment were to be made under that Act for that year. Sec. 4 of the Act provides for inclusion of certain assets in the net wealth of the individual though these assets were not held by him but are held by the spouse or the minor child, to whom they have been transferred by the individual. These assets under S. 4 are considered as the 'deemed assets' of the individual concern. Sec. 5 of the Act exempts certain assets from being included in his 'net wealth'. According to S. 2(m), 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of the Act of all the assets belonging to the assessee on the valuation date including the assets required to be included in the net wealth as on that day under the Act, is in excess of the aggregate value of all the 'debts owed' by the assessee other than the 'debt owed' by the assessee mentioned in sub-cls. (i), (ii) and (iii) of S. 2(m).;