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J. K. Jute Mills Co. Ltd. Vs. Commissioner of Income-tax, U. P. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberWealth-tax Reference No. 330 of 1964
Reported in[1971]82ITR474(All)
AppellantJ. K. Jute Mills Co. Ltd.
RespondentCommissioner of Income-tax, U. P.
Excerpt:
- .....of income-tax and super-tax by the assessee and the assessee claimed that this amount was a debt owed by it on the valuation date, december 31, 1956, relevant for the assessment 1957-58. the claim was rejected by the wealth-tax officer and thereafter by the appellate assistant commissioner of wealth-tax. an appeal on the point was dismissed by the appellate tribunal. the tribunal has found that the amount of rs. 13,04,243 represented assessed taxes which were outstanding for more than one year on the valuation date or which were in dispute, and apparently held that it could not be treated as a debt owed for the purpose of computing the net wealth as defined in section 2(m) of the wealth-tax act, because of section 2(m)(iii) of the act. it seems plain that section 2(m)(iii).....
Judgment:

PATHAK J. - The Appellate Tribunal has referred the following question under section 27(1) of the Wealth-tax Act :

'1. Whether on the facts and in the circumstances of the case, the amount of Rs. 13,54,243 being provision for payment of income-tax and super-tax was deductible in computing the net wealth of the assess ?

2. Whether, on the facts and in the circumstances of the case, the provision for proposed dividend of Rs. 22,000 was deductible in computing the net wealth of the assessee ?

3. Whether, on the facts and in the circumstances of the case, the sum of Rs. 21,61,788 being the balance of the demand payable as a result of the findings and orders of the Income-tax Investigation Commission is deductible in determining the net wealth of the company ?'

As regards the first question, the facts are these : An amount of Rs. 13,54,243 had been provided for payment of income-tax and super-tax by the assessee and the assessee claimed that this amount was a debt owed by it on the valuation date, December 31, 1956, relevant for the assessment 1957-58. The claim was rejected by the Wealth-tax Officer and thereafter by the Appellate Assistant Commissioner of Wealth-tax. An appeal on the point was dismissed by the Appellate Tribunal. The Tribunal has found that the amount of Rs. 13,04,243 represented assessed taxes which were outstanding for more than one year on the valuation date or which were in dispute, and apparently held that it could not be treated as a debt owed for the purpose of computing the net wealth as defined in section 2(m) of the Wealth-tax Act, because of section 2(m)(iii) of the Act. It seems plain that section 2(m)(iii) prohibits the consideration of the said amount of Rs. 13,04,243 as a debt owed for the purpose of such computation. As regards the sum of Rs. 50,000 which represents provisions made by the assessee for the payment of income tax and super-tax for the accounting year ending on the valuation date, the Supreme court has laid down in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax that such a provision for tax must be treated as a 'debt owed' even though the tax liability had not been quantified by the assessing authority by an assessment order. Accordingly, we hold that the said amount of Rs. 50,000 should be treated as a 'debt owed' for the computation of the net wealth of the assessee.

The first question is answered as follows :

'Out of the amount of Rs. 13,54,243 provided for payment of income-tax and super-tax a sum of Rs. 50,000 is deductible in computing the net wealth of the assessee while the sum of Rs. 13,04,243 is not so deductible.

As regard the second question, namely, whether the provision for proposed dividend of Rs. 22,500 was deductible in computing the net wealth of the assessee, the point is concluded by the decision of the supreme court in Kesoram Industries and Cotton mills Ltd. v. Commissioner of Wealth-tax against the assessee. The second question is answered in the negative.

The third question raises the point whether a sum of Rs. 21,61,788 representing the balance of the demand payable in consequence of the findings and orders of the Income-tax Investigation Commissioner could be treated as a 'debt owed' for the purpose of determining the net wealth to the assessee. A similar question arose before us in J. K. Cotton . v. Commissioner of Wealth-tax (Wealth-tax Reference No. 327 of 1964, decided on April 29, 1970) and has been answered in favour of the assessee. Accordingly, we answer this question in the affirmative.

There is no order as to costs. Counsels fee is assessed at Rs. 200.


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