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1977 Supreme(Cal) 117
High Court Of Calcutta
S. C. Deb, Dipak Kumar Sen
COMMISSIONER OF WEALTH-TAX - Appellant
Versus
BANSIDHAR PODDAR - Respondent
Matter 605 Of 1970
Decided On : 04/20/1977
A.K.ROY
The liability to pay tax on undisclosed income is a present liability. It may become payable when, it is discovered and brought to tax or it may become payable when it is disclosed under Section 68 of the Finance Act, 1965, or otherwise disclosed. The liability is always there and is quantified either in the regular course under the Income-tax Act or under the said scheme as laid down by Section 68 of the Finance Act. All the ingredients of a debt are present in such a case.
Headnote:
WEALTH TAX - Deduction - Voluntary disclosure of income under Section 68 of the Finance Act, 1965 - Whether deductible in computing net wealth under Section 2 (m) of the Wealth-tax Act, 1957.
Fact of the Case:
The assessee had made a voluntary disclosure under Section 68 of the Finance Act, 1965, on 25th May, 1965. The amount disclosed was Rs. 2 lakhs with interest accrued thereon being Rs. 3,716. The tax due thereon computed under the said section was paid on 26th May, 1965. In the return of wealth-tax filed by the assessee this amount was included. In the assessment, the Wealth-tax Officer included the entire sum of Rs. 2,03,176, on the ground that both the disclosure and the payment of tax thereon were after the relevant valuation date.
Finding of the Court:
The Tribunal held that in view of the decision of the Supreme Court the income-tax liability on the income declared was a debt and was deductible in computing the net wealth of the assessee.
Issues: Whether, on the facts and circumstances of the case, the tax paid by the assessee on the basis of the voluntary disclosure of income under Section 68 of the Finance Act, 1965, after the relevant valuation date, was deductible in computing the net wealth of the assessee, under Section 2 (m) of the Wealth-tax Act, 1957.
Ratio Decidendi: The tax paid by the assessee pursuant to a voluntary disclosure under Section 68 of the Finance Act, 1965, after the valuation date is deductible in computing the net wealth of the assessee under Section 2 (m) of the Wealth-tax Act, 1957.
Final Decision: The question is answered in the affirmative and in favour of the assessee. There will be no order as to costs.
( 1 ) THE question involved in this reference under Section 27 (1) of the Wealth-tax Act, 1957, at the instance of the Commissioner of Wealth-tax, West Bengal III, Calcutta, is whether tax paid by an assessee on the basis of his voluntary disclosure under Section 68 of the Finance Act, 1965, is an allowable deduction in the computation of his net wealth under Section 2 (m) of the Wealth-tax Act, 1957. The reference arises out of the assessment of wealth-tax of Bansidhar Poddar, the assessee, for the assessment year 1965-66, the relevant valuation date being the 9th April, 1965.
( 2 ) THE facts found or admitted are, inter alia, that the assessee had made a voluntary disclosure under Section 68 of the Finance 'act, 1965, on the 25th May, 1965. The amount disclosed was Rs. 2 lakhs with interest accrued thereon being Rs. 3,716. The tax due thereon computed under the said stction was paid on the 26th May, 1965.
( 3 ) IN the return of wealth-tax filed by the assessee this amount was included. In the assessment, the Wealth-tax Officer included the entire sum of Rs. 2,03,176, on the ground that both the disclosure and the payment of tax thereon were after the relevant valuation date.
( 4 ) BEING aggrieved, the assessee appealed to the Appellate Assistant Commissioner of Wealth-tax contending that the income-tax liability on this disclosed sum ought to have been allowed as deduction in computing the net wealth. The assessee relied on the decision of the Supreme Court in the case of Kesoram Industries and Cotton Mills Ltd, v. Commissioner of Income-tax. The Appellate Assistant Commissioner accepted the contention of the assessee and allowed the appeal.
( 5 ) THE revenue preferred a further appeal to the Tribunal. It was contended before the Tribunal that the decision of the Supreme Court did not apply in the facts and circumstances of the case inasmuch as the tax liability was consequent to the declaration made under a specific provision of the relevant Finance Act, something unforeseen and, therefore, such liability could not be stated to have arisen on the relevant valuation date. The assessee contended otherwise. The Tribunal held that in view of the decision of the Supreme Court the income-tax liability on the income declared was a debt and was deductible in computing the net wealth of the assessee.
( 6 ) FROM this decision of the Tribunal the following question has been referred for our decision :" Whether, on the facts and circumstances of the case, the tax paid by the assessee on the basis of the voluntary disclosure of income under Section 68 of the Finance Act, 1965, after the relevant valuation date, was deductible in computing the net wealth of the assessee, under Section 2 (m) of the Wealth-tax Act, 1957. "
( 7 ) TO appreciate the point in controversy it is necessary first to consider the provisions of Section 4 of the Income-tax Act, 1961, sectioa 68 of the Finance Act, 1965, Section 2 (m) of the Wealth-tax Act, 1957, and the decision of the Supreme Court in the case of Kesoram Industries and Cotton Mills Ltd.
( 8 ) SECTION 4 of the Income-tax Act, 1961 provides, inter alia, as follows :"4. Charge of income-tax.--Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of the total income of the previous year or previous years, as the case may be, of every person : provided that where by virtue of any provision of 'this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly. " Section 68 of the Finance Act, 1965 reads, inter alia, as follows :"68. Voluntary disclosure of income.-- (1) Where any person makes a declaration in accordance with Sub-section (2) in respect of the amount representing income- (a) which he has faile
