1997 PLP (Trib (PTD)

3. On appeal by the assessee, the learned AJCT mistakenly disallowed the claim under a misconception that the liability in respect of outstanding Income-tax is not a debt. The assessee also claimed exemption of Wealth Tax in connection with the car used for private and personal purpose under section 5(i)(vi) of the Wealth Tax Act. The said cline was also not heeded to by the Taxation authorities below.

4. Heard the learned representatives of both the parties, perused the impugned order and the documents filed as well as the written argument filed by the learned representative of the assessee. As all the 4 appeals arise from the same impugned order and grounds taken in the said appeals-are the same, was dispose of the appeals by a consolidated order as under.

5. Car-Clause-VI, subsection (1), section 5 of Wealth Tax Act lays down the Wealth Tax shall not be payable by an assessee in respect of the following assets and such assets shall not be included in net wealth of the assessee. (v) Furniture, household utensils, wearing apparel, provisions and other articles (excluding jewellery) intended for the personal or household use of the assessee. It appears from the plain meaning of the quoted clause that exemption was granted in respect of articles necessary for every householder for constant household and personal use by general people at large and so jewellery which is not a necessary article of general household and personal use has been excluded. In the subsequent clauses that follow-tools, implements, apparatus and instruments for raising agricultural produce and necessary to enable the assessee to carry on his profession or vocation or for scientific research subject to the maximum of twenty thousand rupees in value have also been exempted. Car is not a tool, implement, apparatus or instrument of such a nature nor does it seem to be in constant use as a necessary article by the general people nor does it seem to be necessary to enable the assessee to carry on his profession or vocation or for agriculture or for the purpose of research. Moreover, a car is a valuable asset of the value of more than Taka twenty thousand. On the other hand, in his written submission the learned A.R. did not mention anything about the car not in his oral submission did he at all press the point. So, in the facts and circumstances of the case and the law involved car does not seem to be an asset in respect of which the assessee can claim exemption.

6. The learned AXT mentioned in the impugned order that there is no explicit mention about the car in clause-VI, subsection (1), section 5 of the Wealth Tax Act as exempted from Wealth Tax. We find no ground to interfere. So, it is decided against the assessee appellant.

7. Unpaid Income-tax

Here the question before us is whether balance of Income-tax that remained unpaid is a debt, in respect of which exemption from Wealth Tax is available.

8. It is known to all that under section 3 of the Wealth Tax Act, 1963, Wealth tax is charged for every financial year commencing on and from the 1st July, 1963, in respect of the net wealth on the corresponding valuation date of every individual and Hindu undivided family at the rate or rates specified in the schedule. 9. 'Net wealth' means the amount by which the aggregate value computed in accordance with the provision of the Wealth Tax Act, 1963, 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 that 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.

10. In short net wealth means the value of the assets minus debts excepting two kinds of debts enumerated above.

11. Under section 6, in computing net wealth of a non-resident or not ordinarily resident in this country during the year ending on the valuation date, debts and value of assets located outside the country and the value of assets in the country represented by loans or debts wing to the assessee where interest payable on such loans or debts is exempt from tax under notification issued under subsection (i)'of section 60 of the Income-tax Act. It should be noted here that subsection of section 6 of the income Tax Act is nothing but an empowering provision to exempt, reduce or modify Income-tax on some sorts of income of the assessee.

12. In other words, exception laid down under section 6 of the Wealth Tax is not applicable in the case of the assessee, who is an all time resident of this country and concerned assets and alleged debts arc all located in this country. Similarly, debts alleged by the assessee were not secured on nor incurred m relation to any asset. So, exception clause included in the definition of net-wealth and under section 2 clause (m) is not applicable in case of the assessee.

13. Now we embark upon the discussion whether Income-tax that remained unpaid is debt as contemplated in the definition of net wealth given in subsection (m) of section 2 of the Wealth Tax Act, 1963.

14. The words "debt" has nowhere been defined in the Wealth Tax Act, 1963 or the Wealth Tax Rules 1963, nor in the Income Tax Act, 1922 or the Income Tax Ordinance, 1984. The Dictionary meaning of the word ' debt' is I what one owes to another'. In that sense Income-tax is a debt as the assessee owes it to Government. The assessee has a liability to pay Income-tax if he earns a taxable income.

15. From Annexure-V of the Income-tax Rules we get description of debts owed by the assessee relating to business carried on by him. The description includes

1. Secured loans,

2. Unsecured loans,

3. Trade creditors and

4. Other items. It should be noted here that Trade Creditor is a liability to pay, rather than a 'loan, in respect of goods purchased on credit. So, we are of opinion that liability to pay income-tax comes under item No.4 relating to business it is because bad he not earned an income he would not be liable to pay Income-tax. It appears from Annexure-VI that there may be debts owing by the assessee other than those included in Annexure-V. These are non-business debts. So, in this context we take the words debts to mean liabilities to pay. In that sense, Income-tax is a liability and as such a debt which need be deducted in order to compute net wealth.

16. Moreover, in the instant cases, we find from the assessment orders that besides other assets, the assessee had cash in hand to the turn of Taka 10,000,000, Taka 10,00,000, Taka 2,50,000 and Taka 2,00,000 for the assessment years 1985-86, 1986-87, 1987-88 and 1988-89 respectively. If the assessee paid the Income-tax levied by the assessing officer earlier, his assets would diminished to that extent.

17. Now , the question arises whether the liability to pay the Income-tax imposed in respective years are a contingent liability. In our opinion, it is, for the present, not a contingent liability as it is a liability, fixed by the assessing officer, which the assessee is bound to pay if he gets no relief in appeals preferred. So, it is a fixed liability and not a contingent one.

18. So, in our opinion, the balance of Income-tax that remains unpaid as ; per Income-tax imposed by the assessing officer need be deducted from his total asset in order to compute taxable net wealth for each of the assessment years, under appeal. In the result, the appeals succeed to the extent mentioned above and the impugned order is modified accordingly The DCT is directed to deduct Income-tax assessed by the assessing officer minus what has already been paid to compute taxable net wealth of the assessee in respect of each assessment year under appeal subject to adjustment as per appellate orders on correct Income-tax to be decided finally in appeals, but he is to include the car in the list of net wealth. Thus, we dispose of the appeals. C.M.S./2/PTD Appeals disposed of.