Judgment

UNTWALIA, J.:- These are three appeals by special leave filed by the Commissioer of Wealth Tax. Mysore from the judgment of the Mysore (now Karnataka) High Court. The assessee is the Dowager Maharani of Gondal. Her husband. His Highness Bhojjrajji Maharaja Saheb of Gondal, died intestate on 31-7-1952 leaving considerable moveable and immoveable properties. Certain disputes and differences arose after his death between his two sons namely, Maharaja Vikramsinghji and his younger brother Shivaraj Singhji in respect of the assets left by the late Maharaja Saheb. The younger brother was contemplating legal proceedings against his elder brother. Their mother intervened. The idea of litigation, thereupon, was dropped because the assessee gave a letter dated 14-5-1953 to Shivraj Singhji stating therein :

"Your father had expressed in the presence of many people that he will give you rupees fifty lakhs. To keep up his words and promise and also that I should get peace of mind I am writing to you that if your brother Vikramsinghji Maharaja of Gondal does not give you the full amount, then you must get the balance of amount from me. That is my sincere desire. I will also press Vikram that he should give you the amount of Rupees fifty lakhs."

2. Vikramsinghji paid only Rupees 20,00,000/- to Shivaraj Singhji. The latter, therefore, claimed the balance amount of Rs. 30,00,000/- from the assessee on the basis of her letter dated 14-5-1953. On or about 12-9-1959, pursuant to her commitment made in the letter aforesaid, the assessee transferred War Stock valued at Rs. 11,00,000/- to Shivraj Singhji and also agreed to hand over certain ornaments in full settlement of his claim. The ornaments were however not given. That led to disputes between the mother and the son but eventually they were also settled on 22-2-62 which settlement was evidenced by a document setting out all the relevant facts of the history of the dispute. By virtue of this settlement a sum of Rupees 10,00,000/- was paid by the assessee to Shivaraj Singhji.

3. The assessees wealth was assessed to wealth-tax under the Wealth-tax Act, 1957 for the three assessment years in question viz., 1960-61, 1961-62 and 1962-63. The corresponding valuation dates of the said assessment years are 31-12-1959, 31-12-1960 and 31-12-1961. It would be noticed that the assessee, under the arrangement arrived at between the parties became liable to pay the balance of the amount of Rs. 30,00,000/- to Shivraj Singhji as Vikramsinghji, out of the sum of Rs, 50,00,000/- mentioned in the letter dated 14-5-1953, paid only Rupees 20,00,000/- . The assessee succeeded in wiping off her liability to the extent of Rs. 11,00,000/- on 12-9-1959 by transfer of War Stock. The balance of the liability i. e. Rs. 19,00,000/- remained due and continued to be due on all the three valuation dates aforesaid. It could be wiped off by a further settlement only in February, 1962. In respect of the three assessment years in question, however, a question arose as to whether while assessing the net wealth of the assessee within the meaning of cl. (m) of Sec. 2 of the Wealth-tax Act the said sum of Rs. 19,00,000/ was to be deducted. The Wealth-tax Tribunal held in favour of the assessee. At the instance of the Revenue for all the three years a common question of law was referred to the High Court for its opinion. The questions being in identical terms it would suffice to quote the question with respect to the assessment year 1960-61. It reads as follows :

"Whether on the facts and circumstances of the case, the sum of Rs. 19 lakhs could constitute a debt owed by the assessee and deductible under the Wealth Tax Act from the value of the total assets as on 31-12-1959?"

The High Court has answered the question in the affirmative, in favour of the assessee and against the department. Hence this appeal.

4. Mr. Ahuja appearing in support of the appeal contended that by the letter dated 14-5-1953 no debt was created as the undertakin