PETITIONER:
BURMA OIL CO. (I) TRADING LTD. CALCUTTA
Vs.
RESPONDENT:
COMMISSIONER OF WEALTH TAX (CENTRAL) CALCUTTA
DATE OF JUDGMENT01/12/1976
BENCH:
KHANNA, HANS RAJ
KRISHNAIYER, V.R.
CITATION:
1977 AIR 784 1977 SCR (2) 295
1977 SCC (1) 196
ACT
Wealth Tax Act 1957--Sec. 2(m)--Whether provision for
tax liability is a debt.deductible in computing wealth.
HEADNOTE
The appellant made a provision for a sum of Rs.49,19,520/-
in his books of account for the discharge of its tax liabil-
ities. The appellant claimed deduction of the said amount
for computation of his net wealth on the ground that it was
a debt owed by the assessee within the meaning of s. 2(m) of
the Wealth Tax Act. The claim was disallowed by the Wealth
Tax Officer, the Appellate Asstt. Commissioner of Wealth Tax
and the Tribunal. The High Court of Calcutta answered the
reference in favour of the revenue and against the assessee
relying on its earlier decision in the ease of Assam Oil Co.
Ltd.
Allowing the appeal by certificate,
HELD: This Court has reversed the decision of Calcutta High
Court in the case of Assam Oil Co. Ltd. In that case this
Court held by majority that the amount set apart by an
assessee in his balance sheet on the valuation date as an
estimated provision for meeting its tax liability less the
last instalment of the payment of the advance tax was a debt
owed by the assessee within the meaning of s. 2(m) of the
Wealth Tax Act, 1957 and was deductible in computing its net
wealth as on that date. The Court followed the said deci-
sion. [296C-G]
Assam Oil Co. v. Commissioner of Wealth Tax, Central Calcut-
ta, 60 I.T.R. 267 followed.
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 71 of 1972.
(From the Judgment and Order dated the 18th December, 1964
the Calcutta High Court in Matter No. 199/61).
T.A. Ramachandran and D.N. Gupta, for the appellant.
B.B. Ahuja and R.N. Sachthey, for respondent.
The Judgment of the Court was delivered by
KHANNA, J. This appeal on certificate is against the
judgment of the Calcutta High Court whereby the High Court
answered the following question referred to it under section
27 of the Wealth Tax Act in favour of the revenue and
against the assessee-appellant:
"Whether on the facts and in the circum-
stances of the case, the provision of
Rs.49,19,520/- made by the assessee for its
tax liability less the amount of the last
instalment of advance tax constituted a debt
owed by the assessee within the meaning of
clause (m) of section 2 of the Wealth Tax Act
on the relevant valuation date ?"
The matter relates to the assessment year 1958-59, the
relevant valuation date for which was December 31, 1957. A
sum of Rs.49,19,520/- was provided for in the books of the
appellant for the dis-
3 --1546 SCI/76
296
charge of its tax liabilities. The appellant claimed the
amount as a deduction in the computation of the net wealth.
The claim was disallowed by the wealth tax officer, the
Appellate Assistant Commissioner of Wealth Tax and the
Tribunal. On an application filed by the appellant, the
Tribunal referred the question reproduced above to the High
Court.
The High Court, while answering the question in favour
of the revenue and against the assessee-appellant, relied
upon its earlier decision in the case of Assam Oil Co.
Ltd. v. Commissioner of Wealth Tax, Central Calcutta(1).
The decision in the case of Assam Oil Co, Ltd. relied
upon by the High Court was reversed on appeal by this Court.
Naturally therefore at the hearing of the appeal, Mr. Rama-
chandran, learned counsel for the appellant, has drawn our
attention to that decision of this Court in the case of
Assam Oil Co. v. Commissioner of Wealth Tax, Central Calcut-
ta(2). It was held in that case by majority that the amount
set apart by the appellant-company in its balance-sheet as
on December 31, 1956 as an estimated provision for meeting
its tax liability, less the last instalment of the demand of
the advance tax, was a debt owed by the appellant company on
December 31, 1956, the relevant valuation date, within the
meaning of section 2(m) of the Wealth Tax Act, 1957, and was
deductible in computing its net wealth as on that date.
Following that decision, we are of the view that the answer
to the question referred by the Tribunal to the High Court
should be in the affirmative in favour of the assessee-
appellant and against the revenue. Mr. Ahuja submits that
the view taken by the majority in the case of Assam Oil Co.
Ltd. needs reconsideration. This Bench, however, is bound by
that decision. Following that decision, we accept the
appeal, set aside the judgment of the High Court and answer
the question referred by the Tribunal in the affirmative in
favour of the assessee-appellant and against the revenue.
The parties in the circumstances shall bear their own costs
of this Court as well as of the High Court.
P.H.P. Appeal
allowed.
(1) 48 I.T.R. 49.
(2) 60 I.T.R. 267.
297