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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 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

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       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