THE COMMISSIONER OF WEALTH TAX, GUJARAT, AHMEDABAD versus KANTILAL MANILAL ETC. ETC.

Citation: [1985] 3 S.C.R. 297 · Decided: 13-03-1985 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Dismissed

Judgment (excerpt)

; - ~ 
J 
Z91 
THE COMMJSSJONER OF WEALTH TAX,. 
OUJARAT, AHMEDABAD 
v • 
. · KANTILAL. MANILAL ETC. ETC. 
March.13, 198S 
. [R.S: PA1HAK AND E.S. VE~KATARAMIAH., J J,] . 
Wealth Tax Act,- Section 2 (m)-. (iii) (a}, scope of -
New wealth, com .. 
putation of -
Debt due -
Ingredients neceJsary for invoking the bar prescribed 
by Section 2 (m) ·(iii) (a}, explained~ Admissibility of the as!essee's claim 
for a deduction Of certain sums representing the estimated liabilities on account 
of Income Tax and Wea/th Tax. 
.. , .::For the .asseSsment years 1961-62 and 1962~63: the cOrresponding valuation 
.dates' of Which were March-31, 1961 and March 31. 1962,. assessment orders 
were made under the Wealth Tax Act on March 24, 1961 and March 23, 1962 
respectively while the notice of demands were served on the assessee on Apn1 t 1, 
1961 and April 11, 1962 respectively. 
Against the said notices of demand the 
asSesseei preferred' appe<i.ts on May 9, 1961 and May 9; 1962 reSpectiveIY. 
For 
the purpose of determining the as!jiCSsee's net wealth. the assessec's Claim for a 
· deductiOn of certain Sums·representing the estimated liabilities on account --or 
income tax and Wealth tax was ·rejCcted ir1, bOth · assessinenis 'by the Wealth 
Tax Officer: 
On appeal by the assessee; the Appellate Assistant cOmrriis: 
· ·siorier of Wealth Tax allowed a part of the"claim. JD appeall>efoi-e the ApPcl· 
late Tribunal, the RevCnue cOnten.ded that sincC the assessee h3.d -disPutcd th• 
wealth tax liability of Rs,· 22,679/· in respect of the assessment year 1960-61 
and _the sum of Rs. 39,692/· in respect of the assessment ye~ 1961~62, he was 
.not CD;titled to a deduction of the sarre, teing barred. by. reason·of the.pro~ 
visiOnS of seCtion 2(m) (iii) (a) of t~e Wealth Tax Act. : The. Tribunal rejectCd 
the said contention and held that section 2 · (m)(a) \vas not ·attract'ed as the 
.t3.X b3.d not become p:iyable on the relevant valuation dates .. The Wealth Tax 
JiCferCnces made at the instance of the Revenue were decided in favour· of 'the 
2sSessCe bf the High Court of Gujatat by its coinmon judgment in Commlssiimer 
'of Wealth Tax v. Kan/I/al Manila/ reported in (1973) 88 J.T.R. 125 •. The pre-
sent appeal by special leave arises therefrom. 
Dismissing the appeal, the Court 
. . 
. _HELD :.1.l . In order to invoke the bar prescribed by _Section 2(m)(iii) 
(a) of the Wealth Tax Act it is necessary for the Revenue to establish that bOth 
.. A 
D 
298 
SUPREME COURT REPORTS 
[l 9851 3 s.c.tt. 
A 
requirements therein are satisfied, that is to say, that an amount of the tax is 
outstanding on the valu.ation date and further that the amount is c]aimed by 
the assessee in an appeal as not being payable by him. 
[302E-F] 
C' 
D 
F' 
H 
1.2 
An amount of tax is outstanding if it is payable and has remained 
unpaid. 
In other words, if there is a debt due and there has been no payment 
of the debt. 
There are three stages in respect of an income tax liability. 
The 
tax liability comes into existence on the last day of the previous year relevant 
to the assessment year: 
Thereafter when the assessment proceedings take pJace 
an assessment order is made quantifying the assessable income and determining 
the tax payable. 
Thereupon, a notice of demand is served for payment of 
the tax, and the tax then becomes payable and a debt becomes due to the 
Revenue. 
A survey of the provisions of the Wealth Tax Act contained in 
Sections 14 to · 17 and Section 30 makes it clear that in all material respects 
the scheme of the Wealth· Tax Act is in thi~ regard substantially, the same as 
that incorporated in the Income Tax Act. 
The notice of demand requiring 
payment of the tax, interest or penalty is issued pursuant to Section 30 of,'the 
Act. 
If the amount remains unpaid within the periods specified in the ·notice. 
the amount of the tax is said to be outstanding. 
[303D~Fl 
1.3' Section 2(m)( iii)(a) of the Wealth Tax Act comes into play only 
after a demand for payment of tax has been made, 
The clause, read in its 
entirety; speakS of a debt owed by the assessee represented by an amount of tax 
"Payable in conseqllence of any order"· passed under the relevant tax statute 
and· "outstanding on the valuation dates." 
[303H ; 304AJ 
1.4 
The expression "debt owed" is a debt which the assessee is under 
0
• 
an obligation to pay and, therefore, it includes both a liability to pay in. pre .. 
senti as well as a liability to pay in futur0 an ascertaina

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