Jeevan Reddy, J.
1. For the assessment year 1972-73, the assessee was assessed to wealth-tax on October 27, 1973, on a net wealth of Rs. 2,56,943. The relevant valuation date for the said assessment year is March 31, 1972. While completing the assessment, the WTO disallowed the assessee's claim for deduction in a sum of Rs. 1,39,703, being the income-tax liability for the assessment years 1968-69 and 1969-70. The assessee's claim was that the demand notice for the said amount was served upon him on March 28, 1972, and, therefore, the said amount should be deducted under sub-clause (iii)(a) of the definition of 'net wealth' contained in clause (m) of s. 2 of the W.T. Act. This claim was rejected by the WTO on two grounds, viz., (i) that no provision for the said debt has been made in the balance-sheet as on March 31, 1972, and (ii) that the assessee has been disputing the said liability even from the beginning of the income-tax assessment proceedings. On appeal, the AAC agreed with the view taken by the WTO; but, on further appeal, the Tribunal held that, inasmuch as on the relevant valuation date, the demand for the said amount of income-tax was outstanding, it has to be deducted from out of the aggregate value of all the assets, as per the definition of the expression 'net wealth'. The Tribunal observed further that the mere fact that the assessee filed an appeal subsequent to the relevant valuation date, does not affect the matter.
2. We are of the opinion that the view taken by the Tribunal is in accordance with law. The definition of 'net wealth' in clause (m) of s. 2 reads as follows :
'(m) 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than -
(i) debts which under section 6 are not to be taken into account;
(ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act; and
(iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958), -
(a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him; or
(b) which, although not claimed by the assessee as not being payable by him, is nevertheless outstanding for a period of more than twelve months on the valuation date.'
3. Now, the demand for the said amount of income-tax was served upon the assessee on March 28, 1972, which means that the said amount of tax was outstanding on the valuation date, viz., March 31, 1972. The amount of tax was payable immediately the demand notice was served. If so, the case clearly falls within sub-clause (iii)(a) of the definition. The mere fact that an appeal was filed subsequent to the valuation date cannot affect this position. To deprive an assessee of the benefit of sub-clause (iii)(a), the appeal, revision or other proceeding, as the case may be, must have been pending on the relevant valuation date. (see P. Appavoo Pillai v. CWT : 91ITR138(Mad) . Then alone such a debt cannot be deducted from out of the aggregate value of all the assets, as contemplated by the definition.
4. For the above reasons, the question referred to us is answered in the affirmative, i.e., in faour of the assessee and against the Revenue. No costs.
(The referred question, which does not appear in the body of the judgment, is reproduced hereinbelow, from the preamble to the the Judgment.
'Whether, on the facts and in the circumstances of the case, the claim of income-tax liability of Rs. 1,39,703 as a deduction from the wealth of the assessee is admissible ?'