ORDER
S. Kannan, Accountant Member
1. This appeal by the Department is directed against the order dated 21-8-1990 of the CWT(A), Coimbatore, relating to the assessment year 1985-86.
2. Issue No, 1 – Valuation of shares of Tirupur Textiles (P.) Ltd. and Sovereign Engineers Pvt. Ltd.. The assessing officer had valued these unquoted shares by applying the break-up method incorporated in Rule 1-D of the Wealth-lax Rules, 1957. On appeal, the CWT(A) directed valuation of these shares on yield basis.
3. The question whether Rule 1-D is directory or mandatory stands decided, in favour of the assessee, by the jurisdictional High Court in the case of KM. Mammen v. CWT [1983] 139 ITR 357 (Mad.) (App.) in which it has been held that Rule 1-D is only directory and not mandatory. We, therefore, reject the Department’s appeal on this issue.
4. Issue No. 2 – Deduction towards Estate Duty liability :
Before the Wealth-tax Officer, the assessee had claimed deduction in respect of estate duty liability relating to the value of certain assets that had devolved on him on the death of his father and which had been included in his wealth-tax assessment. It would appear that the estate duty liability was provisionally fixed at Rs. 16 lakhs. Finding that the estate duty demand was pending for more than one year, the WTO negatived the assessce’s claim.
5. The first appellate authority took the line that under Section 74(1) of the Estate Duty Act, the liability to pay Estate Duty arises on the property passing on death and that it is a first charge on the property. It, therefore, followed that the assets that devolved on the assessee on the death of his father were not encumbrance-free but came to him with a charge attached to them. In this view of the matter, the first appellate authority directed the assessing officer to allow the sum of Rs. 16 lakhs as a deduction in the computation of the assessee’s net wealth.
6. The Department’s case is that as has been held by the jurisdictional High Court in the case of K.R. Ramachandra Rao v. CWT [1963] 48 ITR 959 (Mad.), a liability to Estate Duty which is neither ascertained nor quantified on the valuation date is not a debt within the meaning of Section 2(m) of the Wealth-tax Act and cannot, therefore, be taken into account in computing the net wealth.
7. If we may say so, with respect, the case law has moved considerably away from the position taken by the jurisdictional High Court in the case referred to (supra). From Kesoram Industries & Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 through H.H. Setu Parvati Bayi v. CWT [1968] 69 ITR 864 to CWT v. Vadilal Lallubhai [1984] 145 ITR 7, we have a long catena of cases decided by the Supreme Court in which it has consistently been held that the liability to pay a statutory impost gets crystallised on the happening of the taxable event and once the taxable event has taken place, a perfected debt has come into being. It has also been specifically clarified that the quantification of the liability is not relevant in the context of determining the question whether a perfected debt within the meaning of Section 2(m) of the Wealth-tax Act, 1957, had come into existence.
8. In the case before us, it is not disputed that the assessee’s father died a few days before the relevant valuation date. Death being the taxable event for the purpose of Estate Duty, a perfected debt in the form of liability to pay Estate Duly on the estate of the deceased came into being on the date of death of the deceased. Therefore, conceptually speaking the assessee is entitled to a deduction, even under the main part of Section 2(m) in respect of the Estate Duty as finally determined in the Estate Duty proceedings.
9. The assessing officer was obviously keeping in mind the provisions of Section 2(m)(iii) of the Act. He has, however, overlooked the significant fact that Section 2(m)(iii) talks of tax, penalty or interest payable in consequence of any order passed by the assessing officer under any of the Acts referred to therein. In the case before us, no order, provisional or final, was passed under the Estate Duty Act prior to the relevant valuation date. Therefore, Section 2(m) cannot be called in aid.
10. But this docs not mean that Section 2(m)(iii) is excluded for ever. It will get activated and be applicable to the assessment years whose relevant valuation dates are posterior in point of time to the time at which an assessment order, provisional or final, is passed under the Estate Duty Act. It is at that time that the WTO will have to examine whether by reason of the operation of either Section 2(m)(iii)(a) or 2(m)(iii)(b) of the Act, the assessee’s claim for deduction in respect of Estate Duty liability is to be rejected. That stage has not been reached as yet.
11. In view of the foregoing, therefore, we decline to interfere in this aspect of the matter.
12. In the result, the Departmental appeal is dismissed.