PETITIONER: COMMISSIONER OF WEALTH TAX (CENTRAL)CALCUTTA Vs. RESPONDENT: M/S. STANDARD VACUUM OIL CO. LTD. DATE OF JUDGMENT: 25/10/1965 BENCH: SIKRI, S.M. BENCH: SIKRI, S.M. SUBBARAO, K. SHAH, J.C. CITATION: 1966 AIR 995 1966 SCR (2) 317 CITATOR INFO : MV 1966 SC1370 (54) R 1969 SC 612 (12) ACT: Wealth Tax Act (27 of 1957), ss. 2(m) and 3-Debt owed on valuation date-If includes advance tax due under s. 18A of Income-tax Act, 1922. HEADNOTE: Demands in respect of the payment of tax under s. 18A of the Income Tax Act were made against the respondent for two years, and the final installment for each of the two years, was outstanding on the respective valuation dates as defined under s. (q) of the Wealth Tax Act, 1957 The respondent claimed that the arrears of tax as determined as per notice under s. 18A constituted a debt, owned by it within the meaning of s. 2(m) of the Wealth Tax Act, as on the valuation date, and that the amounts should be allowed as deduction in determining its net wealth under the Wealth Tax Act. The Appellate Tribunal referred the question to the High Court and the High Court answered it in favour of the respondent. In appeal to this Court by the Commissioner of Wealth Tax, HELD : The High Court was right in answering the question in favour of the respondent. A debt is owed when an order is passed under s. 18A(1) and a notice of demand is sent. The amount mentioned in the notice begins to be owed till a new figure is substituted by the assessee under S. 18A(2). Till a new estimate is made by the assessee the amount is ascertained and there is a statutory liability on the assessee to pay the amount mentioned in the order under s. 18A(1) of the Income Tax Act. Since, on the valuation dates in the present appeals, the respondent had not taken any action under s. 18A(2), the amounts mentioned in the notices of demand were debts owed within s. 2(m) of the Wealth Tax Act on the valuation dates. [321 B-C] JUDGMENT:
CIVIL APPELLATE JURISDICTION – Civil Appeals Nos.
627 to 628 of 1964.
Appeals from the judgment and order dated May 14, 1962 of
the Calcutta High Court in Wealth Tax Matter No. 154 of
1960.
A. V. Viswanatha Sastri, N. D. Karkhanis, R. H. Dhebar and
R. N. Sachthey, for the appellant.
T. A. Ramachandran, J. B. Dadachanji, O. C. Mathur and
Ravinder Narain, for the respondent.
The Judgment of the Court was delivered by
Sikri, J. Two questions were referred to the High Court by
the Appellate Tribunal under s. 27 of the Wealth Tax Act
(XXVII
318
of 1957). We are only concerned with the second question
which reads as follows :
“Whether on the facts and in the circumstances
of the case, in computing the net wealth of
the assessee, the arrears of tax as determined
as per notice under Section 18A of the Indian
Income Tax Act for the two assessment years
under consideration constitute a debt owed by
the assessee within the meaning of section
2(m) of the Wealth Tax Act as on the valuation
date
The facts and circumstances of the case are as follows.
Demands in respect of the payment of tax under s. 18A of the
Indian Income Tax Act were made against the respondent com-
pany, M/s. Standard Vacuum Oil Co. Ltd., for the two years
ending December 31, 1956 and December 31, 1957, by notices
of demand dated May 28, 1956 and May 31, 1957, respectively.
The final instalment of the amount of Rs. 47,69,653 for each
of the two years was outstanding on the respective valuation
daters. The assessee claimed that the demand for such, tax
should be allowed as deduction in determining the net wealth
of the assessee under the Wealth Tax Act. The Appellate
Tribunal held that this sum should be deducted from the
total computation of wealth if the said amount was
outstanding for less than a year. It further held that the
demand created under s. 18A of the Income Tax Act was a debt
owed by the assessee, and it directed, the Wealth Tax
Officer to ascertain “whether the demand referred to in this
case was outstanding for less than one year on the valuation
date and if so, he will allow the same as a deduction.” The
High Court, following its decision in Assam Oil Co. Ltd. v.
Commissioner of Wealth Tax (Central), Calcutta(1), answered
the question in favour of the assessee. The Revenue having
obtained certificates of fitness from the High Court filed
these appeals in this Court.
Mr. Viswanatha Sastri, learned counsel for the Revenue,
contends that on a true interpretation of s. 18A the amount
which is payable under it is not an ascertained amount as
the assessee can estimate the amount which he should pay as
advance tax. He says that the section contemplates more or
less the opening of a running account between the State and
the assessee and the exact amount is not finalised till the
15th of March each year, which is the last date by which the
assessee has to exercise his option to pay the amount
demanded or a lesser sum. He says that the debt really
becomes a debt on the 15th of March when
(1) 48 I.T. 49
319
no option is exercised to pay a lesser sum. In order to
appreciate the contentions of the learned counsel it is
necessary to consider the relevant statutory provisions
first of the Wealth Tax Act and then of the Income Tax Act.
Section 2(m) of the Wealth Tax Act defines “net wealth” as
follows :
.lm15
” 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 this 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; and
(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.
Section 2(q) defines ‘valuation date’ as “in relation to any
year for which an assessment is to be made under this-Act,
means the last day of the previous year as defined in clause
(1 1) of section 2 of the Income-tax Act if an assessment
were to be made under that Act for that year”. It is not
necessary to set out the proviso to this definition.
Section 3 is the charging section which read& as follows
Subject to the other provisions contained in
this Act, there shall be charged for every
financial year commencing on and from the
first day of April, 1957, a tax (hereinafter
referred to as wealth-tax) in respect of the
net wealth on the corresponding valuation date
of every individual, Hindu undivided family
and company at the rate or rates specified in
the Schedule.”
The question with which we are concerned is whether the
amounts directed to be paid by notices of demand dated May
28, 1956 and May 31, 1957, are “debts owed” by the assessee
within s. 2(m) on the respective valuation dates. Now the
notices of demand were issued under s. 18A(1) of the Income
Tax Act. The exact notices of demand which were issued are
not on record, but the learned counsel drew our attention to
the form of notice prescribed under the Act. Section
18A(1), inter alia, provides that the Income Tax Officer may
“by order in writing, require an assessee to pay quarterly
to the credit of the Central Govern-
L2Sup. CI/66 — 7
32 0
ment on the 15th day of June, 15th day of September, 15th
day of December and 15th day of March in that year,
respectively, an amount equal to one-quarter of the income-
tax and super-tax payable on so much of such income as is
included in his total income of the latest previous year in
respect of which he has been assessed.” It is not necessary
to refer to the rate at which he has to calculate the tax.
Sub-section (2) of S. 18A enables an assessee to formulate
his own estimate of the tax payable by him if he considers
that the income is less than on which he has been required
to pay tax, but he has to send this revised estimate ,of the
tax payable by him before any one of the dates specified in
sub-s. (1)(a) and adjust excess or deficiency in respect of
any instalment already paid in a subsequent instalment or in
subsequent installments. It is this provision which Mr.
Sastri relies on strongly to show that the demand under S.
18A(1) is not a debt owed, within s. 2(m) of the Wealth Tax
Act. He further refers to sub-s. (5) which provides for
payment of simple interest by the Central Government for any
amount paid by the assessee in accordance with the
provisions of S. 18A. He says that this shows that it is
really the Government which ultimately becomes the debtor
and there is no question of any debt being owed by the
assessee. He further urges that the word “debt” connotes a
,definite fixed amount and does not include merely a
liability to pay a sum which is not ascertained.
In our opinion, the High Court was right in answering the
question in favour, of the assessee. Section 18A(10)
provides that if the assessee does not submit a revised
estimate under sub-s. (2) of s. 18A, and he does not pay on
the specified date any instalment of tax that he is required
to pay under sub-s. (1), he shall be deemed to be an
assessee in default in respect of such instalment or
instalments, and if he does submit a revised estimate but
does not pay an instalment in accordance therewith on the
date or dates specified in sub-s. (1), he shall be deemed to
be an assessee in default in respect of such instalment or
instalments. Under sub-s. (11) any sum paid or recovered
from the assessee in pursuance of the provisions of S. 18A
is given credit towards the tax due in respect of the
appropriate year. We cannot find any substantial difference
between advance tax paid under the provisions of s. 18A and
tax due and paid under a demand notice passed after an
assessment. The only difference is that if the facts so
warrant, the assessee is enabled to pay less than the amount
demanded by the Income Tax Officer. But till a new estimate
is made by the assessee, the amount is ascertained :and
there is a statutory liability on the assessee to pay the
amount
3 21
mentioned in the order under s. 18A. We agree with the
observations of the Gujarat High Court in Commissioner of
Wealth-Tax v. Raipur Manufacturing Company(1) that “a
condition subsequent, the fulfilment of which may result in
the reduction or even extinction of liability, would not
have the effect of converting the liability which attaches
under such notice under s. 18A into a contingent liability.”
In our opinion, a debt is owed when an order tinder s.
18A(1) is passed and a notice of demand sent. The amount
mentioned in the notice begins to be owe till a new figure
is substituted by the action of the assessee. On the valua-
tion dates in these appeals, the assessee had not taken any
action under s. 18A(2) and consequently the amounts
mentioned in the notices of demand were debts owed within s.
2(m) of the Wealth Tax Act on the valuation dates.
In the result we agree with the Calcutta High Court that the
answer to the question referred to it should be in favour of
the assessee. The appeals, therefore, fail and are
dismissed with costs, one set of hearing fee.
Appeals dismissed.
(1) 52 I.T.R. 482 at p. 522
322
