Per Shri M. R. Sikka, Vice President - The only question for consideration in this appeal is whether the sum of Rs. 1,97,107, being refund of excess income-tax determined after the relevant valuation date, is includible in the wealth of the assessee for the assessment year 1982-83.
2. By his order dated 27-10-1982, the ITO determined the amount of Rs. 1,97,107 as refund of income-tax payable to the assessee for the assessment year 1982-83. The WTO included this amount in the wealth of the assessee for the assessment year 1982-83. While doing so, he rejected the contention of the assessee that the amount of refund due to him had not been quantified on the relevant valuation date, i.e., on 31-3-1982 and, as such, it did not constitute his asset on that date for being included in his wealth for the assessment year 1982-83.
3. On appeal, the AAC, following the decision of the Gujarat High Court in the case of CWT v. Arvindbhai Chinubhai : 133ITR800(Guj) , accepted the contention of the assessee. He held that until the ITO passed the assessment order and quantified the refund, the right to get the refund did not arise to the assessee and, as such the amount of Rs. 1,97,107 was not includible in his wealth for the assessment year 1982.83.
4. Aggrieved by the order of the AAC, the department has filed the present appeal.
6. After going through the record and the hearing the learned representatives of the parties, we are inclined to accept this appeal. It has been held by the Bombay High Court in the case of CWT v. Keshub Mahindra [WT Reference No. 11 of 1970] as follows :
'41. Now, when the definition of net wealth referred to debts owed, it is no doubt true that, at the stage of filing of the returns only the estimated amount of taxes can be claimed as deduction for the purposes of wealth-tax. But it is also equally true that once these amounts have come to be determined during the pendency of the assessment proceedings in respect of wealth-tax, this determination will relate back to the respective assessment years and, therefore, in place of what was an estimated amount of debt due, the assessee will be entitled to ask for the exact amount of debt due in the form of liability of payment of direct taxes. We have, therefore no doubt that the assessee was justified in asking for a deduction of the exact amount of taxes which came to be determined finally during the pendency of the assessment proceedings under the Wealth-tax Act. We are, therefore, unable to find any infirmity in the view taken by the Tribunal when it reversed the order of the Appellate Assistant Commissioner. Consequently, question Nos. 1 and 3 will have to be answered by holding that the taxes ultimately found payable are to be deducted.'
According to the aforesaid authority, the determination of the actual liability of the assessee in respect of wealth-tax, after the relevant date of valuation will relate back to the respective assessment year and the assessee will be entitled to ask for the deduction of exact amount of tax liability in place of the estimated liability claimed in the return. If that be so, there is no good reason to give a different treatment to the refund of tax which is determined after the valuation date. We do not, therefore, find and infirmity in the order of the WTO including to the net wealth of the assessee for the assessment year 1982-83 the amount of income-tax refund relating thereto which was determined after the relevant valuation date.
6. It is true that the Gujarat High Court has taken a contrary view in the case of Arvindbhai Chinubhai (supra). According to this authority, the mere possibility of getting income-tax refund in future as and when the assessment proceedings are to be finalised would not form part of an asset of the assessee belonging to him on the valuation date. But, we would prefer to follow the decision of the Bombay High Court in the case of Keshub Mahindra (supra), in view of the principles laid down by the Supreme Court in the case of CWT v. Vadilal Lallubhai : 145ITR7(SC) . According to this authority, when, in the course of a wealth-tax assessment for a particular assessment year, the assessee makes a claim for deduction on account of income-tax, wealth-tax and gift-tax liabilities as debts owed by him on the valuation date, it is the final quantification of the particular tax which must be taken into account. In computing the net wealth of the assessee, the deduction admissible must be calculated on the basis of the tax as finally quantified on assessment even though the assessment may have been made subsequent to the valuation date. On the basis of this authority of the Supreme Court, we hold that the refund of income-tax wealth of the assessee for the assessment year 1982-83 is includible in the wealth of the assessee for that year even though the refund was determined subsequent to the valuation date.
7. In view of the above discussion, we cancel the order of the AAC and restore that of the WTO.
8. In the result, the appeal is allowed.