The following question of law has been referred under section 27(1) of the Wealth-tax Act, 1957 (hereinafter called "the Act"), for opinion by the Income-tax Appellate Tribunal, Calcutta Bench

"Whether, on the facts and in the circumstances of the case, provisions for taxation amounting to Rs. 2, 25, 000, Rs. 2, 40, 000 and Rs. 2, 90, 933.84 nP. for the assessment years 1957-58, 1958-59 and 1959-60 were proper deductions in the ascertainment of the net wealth of the company as on the respective valuation dates?"

The assessee which is a private limited company is doing business in tea. The assessment years in question are 1957-58, 1958-59, and 1959-60 and the corresponding valuation dates under the Act are 31st December, 1956, 31st December, 1957, and 31st December, 1958. In the balance-sheet the assessee company has made provisions for taxation amounting to Rs. 2, 25, 000, Rs. 2, 40, 000 and Rs. 2, 90, 933.84 nP. in respect of the calendar years 1956, 1957 and 1958 respectively. These amounts are shown in the balance-sheet as provisions for taxation under the head "current liabilities and provisions". The Wealth-tax Officer did not exclude these amounts from the net wealth of the company. The order of the Wealth-tax Officer was affirmed by the Appellate Assistant Commissioner. On appeal the Tribunal took the view that the liabilities for taxation were deductible from the assets of the company for determination of its net wealth and relied upon an earlier decision of the Full Bench of the Tribunal. Dissatisfied with the order of the Tribunal an application was made by the department for reference to this court

The relevant provisions of the Act are set out below. Section 2(m) defines the "net wealth" as follows

"'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; 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 3 which is the charging section, provides

" 3. 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 rate specified in the Schedule."

Section 7 of the Act provides for the determination of the value of the assets. It runs as follows

"7. (1) The value of any asset, other than cash, for the purposes of this Act, shall be estimated to be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date

(2) Notwithstanding anything contained in sub-section (1), ---

(a) where the assessee is carrying on a business for which accounts are maintained by him regularly, the Wealth-tax Officer may, instead of determining separately the value of each asset held by the assessee in such business, determine the net value of the assets of the business as a whole having regard to the balance-sheet of such business as on the valuation date and making such adjustments therein as the circumstances of the case may require;..."

Only the relevant portions of the section have been quoted above. Reading of these sections shows that the wealth-tax is charged on the net wealth of an assessee. The net wealth is arrived at by deducting certain debts from the value of the assets determined in accordance with the provisions of section 7. Before the net wealth can be determined the value of