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Sri Harindar Singh Vs. Wealth Tax Officer, a Ward, Bhatinda and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ No. 1841 of 1962
Judge
Reported inAIR1968P& H353; [1967]64ITR394(P& H)
ActsWealth Tax Act, 1957 - Sections 2 and 3; Income Tax Act, 1961 - Sections 4; Expenditure Tax Act, 1957 - Sections 3; Gift Tax Act, 1958 - Sections 3
AppellantSri Harindar Singh
RespondentWealth Tax Officer, a Ward, Bhatinda and ors.
Appellant Advocate K.C. Puri and; S.K. Sayal, Advs.
Respondent Advocate D.N. Awasthy and; B.S. Gupta, Advs.
DispositionPetition dismissed
Cases ReferredIn Kesoram Cotton Mills Limited v. Commissioner of Wealth
Excerpt:
.....filed under articles 226 and 227 of constitution, if any order/judgment/decree is passed in exercise of jurisdiction under article 226, a writ appeal will lie. but, no writ appeal will lie against a judgment/order/decree passed by a single judge in exercising powers of superintendence under article 227 of the constitution. - 1841 to 1843 of 1962) under articles 226 and 227 of the constitution is an assessee under the wealth tax act 27 of 1957. he has been assessed by the wealth tax officer, a--ward, bhatinda for the various years 1957-58, 1958-59, 1959-60 and 1960-61. the petitioner was not satisfied with the assessment orders, and he applied for rectification under section 35 of the act claiming that the amount of wealth tax and other taxes such as expenditure tax and gift tax,..........the provision 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 asset in respect of which wealth-tax is not payable 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.....
Judgment:
ORDER

Gurdev Singh, J.

1. Colonel His Highness Raja Sir Harinder Singh Brar Bans Bahadur, Ruler of the former Faridkot State, Petitioner in these four writ petitions (Civil Writs Nos. 1841 to 1843 of 1962) under Articles 226 and 227 of the Constitution is an assessee under the Wealth Tax Act 27 of 1957. He has been assessed by the Wealth Tax Officer, A--Ward, Bhatinda for the various years 1957-58, 1958-59, 1959-60 and 1960-61. The petitioner was not satisfied with the assessment orders, and he applied for rectification under Section 35 of the Act claiming that the amount of Wealth Tax and other taxes such as Expenditure Tax and Gift Tax, for which he had incurred liability in a particular year, should have been deducted from his assets in determining the net wealth as defined in Section 2(m) for assessment of the Wealth Tax. This plea has, however, been rejected by the Wealth Tax Officer (respondent No. 1) whose orders have been upheld by the Commissioner of Wealth Tax and the Central Board of Revenue (Respondents 2 and 3). The petitioner DOW challenges the correctness of those orders on the plea that the Wealth Tax authorities had wrongly interpreted the provisions contained in Section 2(m) of the Act.

2. Under Section 3 or the Act, which is the charging section, wealth tax is to be paid by every individual, Hindu undivided family and company at the rate or rates specified in the schedule to the Act. The expression 'net wealth' has been thus defined in Clause (m) of Section 2 of the Act:--

'(m) 'Net Wealth' means the amount by which the aggregate value computed in accordance with the provision 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 asset in respect of which wealth-tax is not payable 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 proceedings 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. The petitioner's contention before the Wealth Tax Authorities was that the wealth tax, to which he was liable for the particular year under assessment, constituted a debt which he owed, and he was entitled to its deduction from the total value of his assets in computing the net wealth on which tax was payable by him tor that year despite the fact that the tax had not till then been assessed and no demand notice for its payment issued to him. Similarly, for some of the years he claimed deduction of Expenditure Tax and Gift Tax which he was liable to pay for those years. In rejecting his contention, the Commissioner Wealth Tax, to whom revision against the impugned orders of the Wealth Tax Officer were taken, in his order, dated 28th April, 1962, observed:--

'The important thing to be considered is whether the tax demands, which have not yet beent determined, can be held to be debts owed by the assessee. A debt is owed only when it has actually been determined. It is only after the order of assessment has actually been passed and the officer has issued a notice of demand calling upon the assessee to make the payment by a particular date that it can be said that the assessee owes the amount of tax as a debt. The tax liabilities claimed by the assessee as deductions had not been determined on the relevant date. They cannot, therefore, be allowed as deduction in arriving at the net wealth of the assessee'.

4. Mr. K. C. Puri, appearing for the petitioner, has argued that the view expressed above is not sustajnable on a plain interpretation of Clause (m) of Section 2 of the Act, in which, except for certain types of debts, it is provided that the debts owed by an assessee have to be deducted from his total assets in determining the net wealth on which he can be called upon to pay tax under Section 3 of the Act. He further argues that once the assessee has incurred liability for payment of the tax, it amounts to a debt owed by him, and, accordingly, the amount which he is liable to pay as tax, irrespective of the fact whether his liability has actually been quantified or not by assessment or a notice of demand issued against him, constitutes a debt owed by him. In this connection, he has cited (1947) 15 ITR 302 : , : [1964]52ITR482(Guj) , : [1965]55ITR556(Guj) and : [1964]51ITR790(KAR) . The Federal Court decision in (1947) 15 ITR 302 : AIR 1947 FC 32, does not directly deal with the point, but it was observed therein by Kania J. (as he then was), who delivered the judgment of the Court:--

'The liability to pay the tax is founded on Sections 3 and 4 of the Income-tax Act, which are the charging sections. Section 22 etc,, are the machinery sections to determine the amount of tax.'

(4-a) The decision of the Gujarat High Court in the Commissioner of Wealth Tax. Gujarat v. Raipur . : [1964]52ITR482(Guj) , is, however, a direct authority on the point. After an exhaustive discussion of the matter and the various authorities bearing on the point it was held that the liability to income-tax arises under the statute imposing the liability and does not depend on assessment and that the liability to tax was not, therefore, a contingent liability but had already accrued on the valuation date and hence was allowable. In the other two decisions, to which Mr. K. C. Puri has referred, the Assam and the Mysore High Courts have expressed a similar view.

Mr. D. N. Avasthy, appearing for the respondents, Wealth-tax authorities, has, however, pointed out that a different view has been taken by the Madras, Calcutta, Bombay and terala High Courts in : [1963]48ITR1005(Mad) , : [1963]48ITR959(Mad) , : [1963]48ITR31(Cal) , : [1963]48ITR49(Cal) , : [1963]50ITR267(Bom) and : [1964]54ITR332(Ker) . In Kesoram Cotton Mills Limited v. Commissioner of Wealth-tax, Calcutta : [1963]48ITR31(Cal) , which has been relied upon by Mr. Avasthy as leading authority in defence of the impugned orders of the tax authorities, it was held by a Division Bench of the Calcutta High Court that although the assessee was liable to pay income-tax on the valuation date, the actual amount of the liability to pay income-tax on the valuation date having not been ascertained and determined by the Income-tax authorities, no debt towards income-tax was owed by the assessee on the valuation date and, accordingly, such liability for payment of income-tax was not a debt owed on the valuation date within the meaning of Section 2(m) of the Wealth-tax Act, 1957.

5. The various authorities cited above disclose a sharp conflict of opinion among different High Courts. All these are Division Bench decisions. There is no decision of this Court bearing on the point. The matter is of considerable importance as it is likely to affect a large number of assessees residing within the jurisdiction of this Court. I, accordingly, consider it expedient that for an authoritative pronouncement, them petitions should be heard by a larger Bench. I, accordingly, direct that the papers be laid before my Lord the Chief Justice for affording roe the assistance of another learned Judge of this Court to dispose of these petitions in accordance with Rule 1 (x) (b) of Chapter 3-B of the Rules and Orders of the High Court. Volume V.

6. Mr. Avasthy requests for an early hearing as guidance of this Court is needed by the respondent-authorities in dealing with a number of similar cases pending before them.


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