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Commissioner of Wealth-tax Vs. Jagannathdas Govindas - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 141 of 1974
Judge
Reported in[1977]110ITR305(Mad)
ActsWealth Tax Act, 1957 - Sections 2
AppellantCommissioner of Wealth-tax
RespondentJagannathdas Govindas
Appellant AdvocateJ. Jayaraman and ;Nalini Chidambaram, Advs.
Respondent AdvocateK.R. Ramamani, Adv. of Subbaraya Ayyar, ;Padmanabhan and ;Ramamani, Advs.
Cases ReferredKesoram Industries & Cotton Mills Ltd. v. Commissioner of Wealth
Excerpt:
direct taxation - provision - section 2 of wealth tax act, 1957 - whether provision made by joint family in its accounts to meet marriage expenses of daughters in question assessable - such provision cannot be said to be sum of money payable by joint family to daughters concerned - so long as test or requirement of sum of money being payable by one person to another is not satisfied there can be no debt as contemplated in act. - - 'even the above extract clearly indicates that unless a sum of money is payable by one person to another, there could be no debt at all. ,so long as this test or requirement of a sum of money being payable by one person to another is not satisfied, there can be no 'debt 'as contemplated in the act or as explained in the decision referred to above......the question for consideration is whether the amount in question which was said to be set apart as marriage provision for the daughters can be said to be ' debts owed by the assessee ' at all. in this context, our attention was drawn to the decision of the supreme court in kesoram industries & cotton mills ltd. v. commissioner of wealth-tax : [1966]59itr767(sc) , and in particular to the following passage dealing with the question as to what constitutes ' debts ' :' we have briefly noticed the judgments cited at the bar. there is no conflict on the definition of the word ' debt'. all the decisions agree that the meaning of the expression ' debt' may take colour from the provisions of the concerned act: it may have different shades of meaning. but the following definition is unanimously.....
Judgment:

Ismail, J.

1. At the instance of the Commissioner of Wealth-tax, Madras-II, Madras 34, the Income-tax Appellate Tribunal, Madras Bench,under Section 27(1) of the Wealth-tax. Act, has referred the following question for the opinion of this court.

'Whether, on the facts and in the circumstances of the case, it has been rightly held that the provision of Rs. 70,604 made for the marriage of the two daughters of the deceased karta is a ' debt owed ' under Section 2(m) of the Wealth-tax Act, 1957, and that it should be deducted in computing the net wealth of the Hindu undivided family? '

2. The short facts that are necessary for understanding the context in which that question has been referred are as follows :

3. The assessee is assessed in the status of a Hindu undivided family. For the assessment year 1969-70, it claimed a total liability of Rs. 3,14,586. This figure was arrived at after deducting a sum of Rs. 19,396 from the liabilities as shown in the balance-sheet at Rs. 3,33,981. The Wealth-tax Officer found that the liabilities included a sum of Rs. 90,000 being the provision for the marriage of Indira and Anusuya. He was of the view that this was not a liability in the true sense of the word. Therefore, he finally held that since the assessee had already deducted a sum of Rs. 19,396, the balance to be deducted worked out to Rs. 70,604 which he added to the total wealth returned. The assessee preferred an appeal and the Appellate Assistant Commissioner confirmed the order of the Wealth-tax Officer. The assessee preferred a further appeal to the Tribunal. Before the Tribunal it was contended that in the day book^of the Hindu undivided family, entries have been made in this behalf as follows :

Rs.M/s. Ch. Indira,

Ch. Anusuya,

Ch.Vasanthi and

Ch. Padmavathi

(Jagannathdas Govindas's daughters) Marriageand maintenance account :

Sri Jagannathdas Govindas's capitalaccount.

Rs. 90,00090,000Being the amount provided as per contrafrom the capital account, ofthe late Sri Jagannathdas Govindas with reference to the E.D. order No. 233 dated26-10-1967.

Amount provided as per contra for themarriage expenses of four daughters

Ch. Indira. J.,

Ch. Anusuya J.,

Ch.Vasanthi J.,

Ch. Padmavathi J.

with reference to the E.D. order F.No. 233 dated 26-10-1967.

4. It was further contended that out of the sum of Rs. 90,000 a sum of Rs. 24,787.18 had been incurred in the marriage account, the balance being Rs. 65,212.82. The assessee also referred to the provision contained in the partial partition dated July 22, 1970, registered as document No. 952/49 in the books of the Sub-Registrar's Office, Sowcarpet, to show that theparties to the partition have agreed to meet the marriage expenses of Vasanthi and Padmavathi, two of the daughters. The legal contention put forward before the Tribunal was that under the Hindu Adoption and Maintenance Act, 1956, under Section 22 thereof, the heirs of a deceased Hindu were bound to maintain the dependants of the deceased out of the estate inherited by them from the deceased and that the property of a Hindu passing into the hands of his collateral heirs after his death, was liable for the reasonable marriage expenses of the daughter of the last holder's predeceased son. These contentions were resisted by the department on the ground that there was only a moral obligation on the part of the father to perform the marriage of his daughter and to bear the expenses of the same and no legal obligation was there. However, the Tribunal held as follows:

'On the facts of the present case, it is clear that the coparceners of the family of Jagannathdas Govindas after his death have recognised the moral obligation of the father by giving effect in the books of account by means of an entry for provision for the marriage, and marriage expenses of two sisters, Indira and Anusuya, have been met out of the provisions and subsequent reference about the partition deed agreeing to meet the marriage expenses of the other persons, all go to support that the family has recognised the obligation to meet the expenses of the marriage of the sisters as a legal obligation. Therefore, the result of the provision made for the marriage has become a legitimate charge on the family estate. That being so, we are of the view that in view of the legal obligation accepted by the family to meet the expenses of the marriage of the sisters has become a legal obligation and these are necessarily a charge on the estate, as we have stated earlier, and in computing the net wealth of the assessee, this has to be deducted as a deduction.'

5. In this view, the Tribunal allowed the appeal preferred by the assessee and it is the correctness of this conclusion of the Tribunal that is challenged in the form of the question reproduced already.

6. We are of the opinion that the Tribunal completely misguided itself in dealing with the matter in question. For the purpose of assessment to wealth-tax, what is necessary to consider is the definition of the expression ' net wealth ' as found in Section 2(m) of the Wealth-tax Act, 1957. That definition is as follows:

' 2(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, the Expenditure-tax Act, 1957, or the Gift-tax Act, 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. '

Consequently, what is deductible under that provision is ' debts owed by the assessee on the valuation date '. Therefore, the question for consideration is whether the amount in question which was said to be set apart as marriage provision for the daughters can be said to be ' debts owed by the assessee ' at all. In this context, our attention was drawn to the decision of the Supreme Court in Kesoram Industries & Cotton Mills Ltd. v. Commissioner of Wealth-tax : [1966]59ITR767(SC) , and in particular to the following passage dealing with the question as to what constitutes ' debts ' :

' We have briefly noticed the judgments cited at the Bar. There is no conflict on the definition of the word ' debt'. All the decisions agree that the meaning of the expression ' debt' may take colour from the provisions of the concerned Act: it may have different shades of meaning. But the following definition is unanimously accepted :

' A debt is a sum of money which is now payable or will become payable in future by reason of a present obligation : debitum in praesenti, sol-vendum in future '.

7. The said decisions also accept the legal position that a liability depending upon a contingency 'is not a debt in praesenti or in futuro till the contingency happened. But if there is a debt, the fact that the amount is to be ascertained does not make it' any the less a debt if the liability is certain and what remains is only the quantification of the amount. In short, a debt owed within the meaning of Section 2(m) of the Wealth-tax Act can be defined as a liability to pay in praesenti or in futuro an ascertain able sum of money. '

Even the above extract clearly indicates that unless a sum of money is payable by one person to another, there could be no debt at all. It isimmaterial whether the amount is payable in future or in present so long as the obligation to pay is present. In this particular case, the facts make it clear that what the joint family has done was to make provision in its accounts to meet the marriage expenses of the daughters in question. Certainly such provision cannot be said to be a sum of money payable by the joint family to the daughters concerned. , So long as this test or requirement of a sum of money being payable by one person to another is not satisfied, there can be no ' debt ' as contemplated in the Act or as explained in the decision referred to above. Therefore, the Wealth-tax Officer and the Appellate Assistant Commissioner were right in holding that what has been done is merely to make a provision and the making of such a provision would not constitute a debt within the scope of Section 2(m) of the Wealth-tax Act, 1957. The Tribunal as a matter of fact nowhere in its order considered this question apart from stating in para-graph 3 thereof that the Appellate Assistant Commissioner to whom the assessee next moved in appeal has agreed with the Wealth-tax Officer's view that the amount in question would not be a 'debt owed on the valuation date '. It has not gone into the question as to whether the provision in question can be treated to be a debt at all owed by the assessee to the daughters so that it may qualify for deduction under the provisions of Section 2(m) of the Wealth-tax Act, 1957. Under the circumstances, we answer the question referred to this court in the negative and against the assessee. There will be no order as to costs.


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