R.K. DEO versus COMMISSIONER OF WEALTH-TAX, ORISSA.

Citation: [1992] 3 S.C.R. 203 · Decided: 12-05-1992 · Supreme Court of India · Bench: R.M. SAHAI · Disposal: Dismissed

Judgment (excerpt)

"'"( 
R.K. DEO 
A 
v. 
COMMISSIONER OF WEALTH-TAX, ORISSA. 
May 12, 1992 
[R.M. SAHAI AND A.S. ANAND, JJ.) 
B 
~ 
Wealth Tax Act, 1957 : 
Sections 2(m), 66 : Income Tax liability as a deduction from wealth 
tax-Outstanding on the valuation date for more than 12 months-:-Whether c 
could be al/owed-Relevant date for purpose of calculating the period of 12 
months-Wliat is-Pendency of reference/appeal before court-Effect of. 
The appellant-assessee, in bis wealth-tax assessments, claimed 
r--
deduction towards tax liability which arose on account of bis income from 
forest brought to tax and upheld by this Court. The Wealth-Tax Officer D 
• 
disallowed the claims as the tax payable remained outstanding for more 
than tWelve months. on the valuation date. On appeal, the Appellate Assis-
tant Commissioner held that the assessee was entitled to claim the said 
deduction in view of the fact that the liability was created by the judgment 
of the Court and discharged subsequently. However, on appeal the E 
Tribunal set aside the order or the appellate authority. The High Court 
affirmed the finding or the Tribunal. 
~ 
The assessee has preferred the present appeals against the High 
Court's orders. 
I 
It was contended on behalf of the appellant that his liability crystal- F 
;.__ 
lised on the last day of the previous year and it became a debt or might 
have become a debt with the passing of the order by this Court in 1958, 
" 
but since it was quantified only iQ October, 1964 when a fresh demand 
notice was issued, the period of 12 months was liable to be counted from 
that date. 
G 
Dismissing the appeals, this <;ourt, 
---< 
HELD 1. The High Court was right in holding that the amotult of 
Rs. 6,69,766 was not admissible as deduction while computing the net 
wealth or the appellant under the Wealth Tax Act for the assessment yeats H 
203 
204 
SUPREME COURT REPORTS 
(1992] 3 S.C.R. 
A 
1962-63 to 1965-66. (212 -BJ 
B 
2. That an Income Tax liability is a debt within the meaning of 
section l(m) of the Wealth Tax Act, 1957 is settled law. In the instant case, 
the amount payable by the &ppellant was, undoubtedly, a debt owed by him 
on the valuation dates. But the appellant could claim its deduction only if 
the revenue failed to show that it was not outstanding for more than 12 
months on the va~uation date. (210 G, H; 211 -A] 
Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth 
Tax (Central), Calcutta, (1966) 59 ITR 767 SC; Commissioner of Wealth Tax, 
C Gujarat v. Kantilal Manila/, (1985) 145 ITR 447 SC and Doorga Prasad v. 
Secretary of State, (1945) 13 ITR 285, relied on. 
3. The appellant was bound to pay the tax assessed irrespective of 
whether he had filed a reference or not'. This, admittedly, was not done by the . 
assessee, and the amount remained outstanding throughout the period the 
D reference was. pending in the High Court. Effect of answering the reference in 
favour of assessee was that he could claim refund. But that occasion could 
arise only if order under section 66(5) was passed by the High Court. But 
before that the correctness of the order was challenged by the department by 
filing an appeal in this Court which was allowed and liability orthe appellant 
E 
F 
to pay tax was upheld. The tax assessed thus remained unpaid during 
pendency of the reference in High Court, as also during pendency of the 
appeal in this Court and it was paid only in March 1965. Effect of non-pay-
ment of tax under sub-section (7) of section 66 was that the tax payable 
became outstanding by operation of law and it remained so on the valuation 
date. Therefore, the bar of sub-clause (b) of clause (iii) of sub-section 2(m) 
operated and the appellant could not claim the amount as deductible while 
computing his net wealth. It was outstanding on the valuation dates for more 
than 12 months whether the period is calculated from service of notice of 
demand in pursuance of assessment order or from th~ final determination of 
liability by the order passed by this Court in 1958 or because of operation of 
G 
sub-section (7) of section 66 of the Act. However, on the facts of the instant 
case it could not be calculated from October 1964 when the notice of demand 
was served by the Income Tax Officer in pursuance of the order passed by the 
Tribunal. [211 E - H; 212 -A] 
Commissioner of Wealth Tax, Madras v. KS.N. Bhatt, (1984) 145 ITR 
H 1 SC, relied on. 
R.K. DEO v. COMMISSIONER (SARAI, J.] 
205 
Commissioner 

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