BURMA OIL CO. (I) TRADING .LTD. CALCUTTA versus COMMISSIONER OF WEALTH TAX (CENTRAL) CALCUTTA

Citation: [1977] 2 S.C.R. 295 · Decided: 01-12-1976 · Supreme Court of India · Bench: HANS RAJ KHANNA · Disposal: Appeal(s) allowed

Judgment (excerpt)

• 
295 
BURMA OIL CO. (I) TRADING .LTD. CALCUTTA 
v. 
COMMISSIONER OF WEALTH TAX (CENTRAL) CALCUTTA 
December l, 1976 
A 
[H. R. KHANNA AND v. R. KRISHNA IYER, JJ.] 
B 
Wealth Tax Act 1957-Sec. 2(m )-Whether provision for tax liability is u · 
·debt deductible in computing wealth. 
· 
The appellant made a provision for a sum of Rs. 49,19,520/- in his books 
of account for the discharge of its tax liabilities. The appellant claimed deduc-
tion of the said amount for computation of his net wealth on the ground that 
it was a debt owed by the assessee within the meaning of s. 2(m) of the Wealth 
Tax Act. The claim was disallowed by the Wealth Tax Officer, the Appellate 
C 
Asstt. Commissioner of Wealth Tax and the Tribunal. The High Court 
of 
Calcutta answered the reference in favour of the revenue and against the assessee 
relying on its earlier decision in the case of Assam Oil Co. Ltd. 
Allowing the appeal by certificate, 
HELD : This Court has reversed the decision of Calcutta High Court in the 
·case of Assam Oil Co. Ltd. 
In that case this Court held by majority that the 
amount set apart by an assessee in his balance sheet on.the valuation date as an 
D 
estimated provision for meeting its tax liability less the last instalment of the 
payment of the advance tax was a debt owed by the assessee within the meaning 
of s. 2(m) of the Wealth Tax Act, 1957 and was deductible in computing its 
net wealth as on that date. 
The Court followed the said 'decision. [296C-GJ 
Assam Oil Co. v. Commissioner of Wealth Tax, Central Calcutta, 60 I.T.R. 
267 followed. 
. 
1,,, 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 71 of 1972. 
E 
(From the Judgment and Order dated the 18th December, 1964 
-0f the Calcutta High Court in Matter No. 199/61). 
T. A. Ramachandran and D. N. Gupta, for the appellant. 
B. B. Ahuja and R. N. Sachthey, for respondent. 
The Judgment of the Court was delivered by 
KHANNA, J. This appeal on certificate is against the judgment of 
the Calcutta High Court whereby the High Court answered the follow-
ing question referred to it under section 27 of the Wealth Tax Act in· 
favour of the revenue and against the assessee-appellant : 
"Whether on the facts and in the circumstances of the 
case, the provision of Rs. 49,19,520/- made by the assessee 
for its tax liability less the amount of the last instalment, of 
advance tax constituted a debt owed by the assessee within the 
meaning of clause (m) of section 2 of the Wealth Tax Act on 
the relevant valuation date ?" 
The matter relates to the assessment. year 1958-59, 
the relevant 
valuation date for which was December 31, 1957. A sum of Rs. 
49,19,520/- was provided for in the books of the appellant for the dis-
3-1546 SCI /76 
F 
G 
H 
A 
B 
c 
D 
E 
296 
SUPREME COURT REPORTS 
[1977] 2 s.c.R. 
charge of its tax liabilities. The appellant claimed the amount as a de-
duction in the computation of the net wealth. The claim was disallowed 
by the wealth tax officer, the Appellate Assistant Commissioner of 
Weal~ Tax and the Tribunal .. On an application filed by the appellant, 
the Tnbunal referred the question reproduced above to the High Court. 
The High Court, while answering the question in favour of the re-
venue and against the assessee-appellant, relied upon its 1~arlier decision 
in the case of Assam Oil Co. Ltd. v. Commissioner of Wealth Tax, 
Central Calcutta(1). 
The decision in the case of Assam Oil Co. Ltd. relied upon by the 
High Court was reversed on appeal by this Court. Naturally therefore 
at the hearing of the appeal, Mr. Ramachandran, learned counsel for 
the appellant, has drawn our attention to that decision of this Court in 
the case of Assam Oil Co. v. Commissioner of Wealth Tax, Central 
Calcutta( 2 ). It was held in that ca§e by majority that the amount set 
apart by the appellant-company in its balance-sheet as on December 
31, 1956 as an estimated provision for meeting its tax liability, less the 
last instalment of the demand of the advance tax, was a debt owed by 
the appellant company on December 31, 1956, the relevant valuation 
date, within the meaning of section 2(m) of the Wealth Tax Act, 1957, 
and was deductible in computing its net wealth as on that date. Follow-
ing that decision, we are of the view that the answer to the question re-
ferred by the Tribunal to the High Court should be in lthe affirmative 
in favour of the assessee-appellant and against the revenue. Mr. Ahuja 
submits that the view taken by the majorit

Excerpt shown. Read the full judgment & AI analysis in Lexace.