Burma Oil Co. (I) Trading Ltd.
Calcutta Vs. Commissioner of Wealth Tax (Central) Calcutta  INSC 309 (1
KHANNA, HANS RAJ KHANNA, HANS RAJ
CITATION: 1977 AIR 784 1977 SCR (2) 295 1977
SCC (1) 196
Wealth Tax Act 1957--Sec. 2(m)--Whether
provision for tax liability is a debt.deductible in computing wealth.
The appellant made a provision for a sum of
Rs.49,19,520/in his books of account for the discharge of its tax liabilities.
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
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 installment 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 decision. [296C-G] Assam Oil Co. v. Commissioner of Wealth Tax, Central
Calcutta, 60 I.T.R. 267 followed.
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
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
"Whether on the facts and in the circumstances
of the case, the provision of Rs.49,19,520/made by the assessee for its tax
liability less the amount of the last installment 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 dis3 --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
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. Ramachandran, 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 Calcutta(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 installment 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 assesseeappellant 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.