COMMISSIONER OF WEALTH TAX GUJARAT, AHMEDABAD versus VADILAL LALLUBHAI ETC.

Citation: [1984] 1 S.C.R. 485 · Decided: 21-10-1983 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

Judgment (excerpt)

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COMMISSIONER OF WEALTH TAX; 
GUJARAT, AHMEDABAD 
v. 
Vl\DILAL LALLUBHAI ETC. 
October !11, 1983 
[R.S. PATHAK AND E.S. VBNKATARAM!AH, 11.I 
485 
Wealth Tax Act, 1957-sec. 2(n-1)-D!finition of 'net 
wealth'-ln~er· 
pretation of. Income tax, wealth tax and gift ·tax liabilities are debts on the 
ltaluation .date and deductions in respect of those· liabilities are to be allowed "n the 
basis of their final quantification on assenmtnt. 
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·The assessee while computing his net we_alth claimed a deduction in 
respect of debts which included amounts representing estimated liabilities on 
account of income tax, wealth tax and gift tax'. The Wealth -Tax Officer rejec-
ted the claim on the ground that as those Habilities wei:e claimed on the basis 
of an estimate they could not be regarded as debts oWed On the valuation dat~., 
In ~ppeal the Appellate Assistant Comil'l:issioner allowed part of the deductions 
claimed. · Th~ Revenue's appeal to the Appellate Tribunal. was dismissed. On 
a reference being.made the; High Court held against the Revenue. 
I~ this Court · 
the Revenue contended that on a true construction of sec. 2 (m) of the Wealth 
. Tax Act defining the expr~ssion "net wealth" the tax liability disclosed by the 
assessee in·~his returns should be taken as representing the debts· owed by the 
~assessee on the valu~tion date. 
Dismissing the .appeals, 
HELD : It is settled law that an income tax liability becomes crystalli-
zed on the last day of the previous year corresp9nding to the particular 
assessment year, and a wealth tax liability becomes crystallized on the valua .. 
tion. date corresponding to the particular assessment year. In each case the 
liabilities ate prcfect-ed debts on the last day of the previous ytar or the valua-
tion date, as the case may be. LikellYiSe, a gift tax liability beci>mes crystallized, 
and therefore a perfected debt, on the last day of the previous year relevant to 
the particular assessment y_ear. (487 P-G; 488 A) . 
Kesoram Industries and Cotton Mills Ltd. v. ·commissioner of Wealth Tax 
(Centrql), Calcutta, (1966) 59 J.T.R. 767; H.H. Setu Parvati Bay/ v. Commls•. 
sioner of Wealth Tax, KeralB, (1968) 69 I.T.R. 864; and Commissioner of 
Wealth Tax,·Madrasv. K.S.N. Bhatt, Civil Appeals Nos •. 384 to387 of1978, 
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a 
• Judgment delivered on October 21, 1983 referred to. 
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When~ in the course of a wealth tax assessment, the asscssee makes a 
claim to de•uction on account of in~me tax, wealth tax and gift tax liabiliti.os 
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.486 
SUPREME ·COURT REPORTS 
[1984] 1 s.c.R. 
subsisting as debts ·owed by· him on 'the valuation date, it is the final quantifi-
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cation of the particular tax liability . which must be taken into account. Where 
,. the wealth tax assessment so made is carried in appea.1,, there is no doubt that 
the appellate authority will take into account th!f ultimate quantification of the 
tax liability even though such· ultimate quantification has been reached aft'er the 
relevant valuation date and during the pendenqy of the Wealth tax appeal. 
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[488 F-GJ 
CIVIL APPELLATE JURISDICTION: .Civil Appeal Nos. 1524-47 of. 
1973. 
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From the Judgment and Order dated 13.12.1972 of the Gujarat· 
·High Court in Wealth Tax References Nos. 6 to II, 13, 15, 17, 18, 
2~. 24 and 25 of 1971, 34, 39, and 40 of 1970, 20 and 42 of 1971, 22, 
35; 41, 42, 4~ & .38of1970. 
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S;C. Manchanda, B.B. Ahuja and Miss A.· Subhashini for the 
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Appellant. 
F.S. Nariman, Mrs. A.K. Verma and K.J. 
John for the 
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Respondents. 
The udgment of the .Court was delivered by 
PATHAK, J : These appeals are directed against the judgment of 
the Gujarat High Court disposing of a number of wealth tax referen· 
ces and answering the following question against the Revenue in each 
reference:-
"Whether in computing the net wealth of the assessee, 
the amount deductible in respect of liabihty of tax for any 
year for which the assessment is the completed after the 
valuation date is the liability as ascertainable on the valua, 
tion daie or 
th~ actual amount of tax subsequently 
· assessed ?" · 
The faets are substantially similar for.different appeals and ·therefore 
it will be sufficient to set forth the facts in one of them alone. In Civil 
Appeal No. 1524 of 197 3 the facts are these. 
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In the computation of his net wealth for the assessment year 
l962-63, the corresponding valuation date being March 31, 1962, the 
assessee 

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