SRINIVASAN J.

For the several assessment years 1940-41 to 1953-54, the assessee had been assessed to a total tax of Rs. 28.87 lakhs. Out of this the demand for RS. 2.27 lakhs became invalidated by the decision of the Supreme Court relating to the Investigation Commission Act. Of the balance of the liability of Rs. 26.60 lakhs, the assessee had paid Rs. 11.11 lakhs. In April, 1957, the assessee petitioned the Central Board of Revenue pointing out that the liability that had been imposed upon him arose mostly out of estimated additions which were disputed by him. He stated further that the net worth of his properties was only Rs. 6.51 lakhs and that if they were to be sold in realisation of the arrears of tax, the properties would fetch even less. He suggested that the total outstanding liability might be reduced to Rs. 6.50 lakhs and that he would withdraw all his petitions by way of appeals, revisions and the like for the relevant years. He also asked that the sum of Rs. 6.50 lakhs, at which his tax liability should be settled, should be made payable in instalments. This request of the assessee was accepted by the Central Board of Revenue on April 25, 1957. Certain dates were fixed upon which portions of the amount of Rs. 6.50 lakhs should be paid. It was also stipulated that in default of payment of the specified amounts on the specified dates, the entire settlement would become void, that is to say, the total amount assessed in respect of the several years would become recoverable In the wealth-tax assessments for the years 1958-59 and 1959-60, the assessee claimed that on the respective valuation dates, the outstanding liability as a result of the above settlement should be treated as debts owed by him and should be deducted from the computation of the net wealth. The Wealth-tax Officer, however, refused to accept this contention. He took the view that no fresh liability was created by this settlement and the effect of the settlement was only that the department agreed to write off the difference between the amount due as per the assessments and the amount settled. In effect, therefore, according to the Wealth-tax Officer, this settled amount only represented a part of the original liability, but as that liability had been outstanding for a period of more than 12 months, it was not deductible as a debt owed within the definition of "net wealth" contained in section 2(m) of the Wealth-tax Act. On appeal, the Appellate Assistant Commissioner accepted this view. There were further appeals to the Tribunal. The Tribunal held in favour of the assessee, overruling the department's contention that because time had been granted for the payment of the amounts, the debt was not owing on the relevant valuation dates. It held that the liability did exist, that it had been quantified and relying upon the decision in Raja of Venkatagiri v. Commissioner of Income-tax, accepted the contention that for the first of the assessment years the sum of Rs. 3.75 lakhs represented the debt owed, and for the second, the sum of Rs. 2.25 lakhs and that these amounts should be deducted in the computation of the net wealthThe department applied under section 27(1) Of the Wealth-tax Act, and the following question was referred by the Tribunal for our determination

"Whether on the facts and in the circumstances of the case, the sum of Rs. 3.75 lakhs and RS. 2.25 lakhs, being the amount of tax remaining unpaid on the two valuation dates were claimable deductions from the net wealth of the assessee under section 2(m) Of the Wealth-tax Act ?" *

It would be convenient to set out at this stage the relevant provisions of the Wealth-tax Act. Wealth-tax is payable under section 3 of the Act in respect of the net wealth of every individual on the corresponding valuation date. "Net wealth" as defined by section 2(m) Of the Act means, broadly stated, the aggregate value of all the assets belonging to the assessee on the valuation date, as is in excess of th