1983 PLP 335 (PTD)

4. In order to appreciate the above contentions, it may be pertinent to quote hereinbelow section 2 (m), which reads as follows :- 2 (m) "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act 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 this Act, is in excess of the aggregate value of all the debts owned 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 ; Explanation.-For the purposes of this clause- (i) any immovable property other than agricultural land, owned by the spouse or any minor child of the assessee shall be deemed to belong to the assessee : Provided that any immovable property so deemed to belong to the assessee shall not be included in the net wealth of the spouse or minor child of the assessee ; (ii)"assessee' shall be the spouse determined by the Wealth Tax Officer, (iii) where the right, title of interest to or in any immovable property other than agricultural land vests in more than one person, such persons shall, in respect of such property, be assessed as an association of persons and the value of each right, title or interest shall not be net wealth of an individual, provided wealth-'tax is charged on such right, title or interest." It may be noticed that under the above-quoted provision of the Act the term "net wealth" for the purpose of filing a return for wealth tax has been defined as an amount which is to be arrived at inter alia after adjusting all debts owed by an assessee on the valuation date other than debts which are not to be taken into account under section 6 of the Act or debts which are secured on or which have been incurred in relation to any assest in respect of which wealth tax is not payable under the Act. 5. (a) The basic question, which requires consideration is, as to whether the amount of Rs. 10,09,000 can be said to be a debt for the purpose of claim ing adjustment under the above-quoted provision of the Act. Mr. Ali Athar has referred to the case of Chatturam arid others v. Commissioner of Income tax, Bihar ((1947) 15 I T R 302), the case of Wellace Brothers and Company Ltd. v. Commissioner of Income tax, Bombay City and Bombay Sub Urban District ((1948) 16 I T R 240), and tax case of Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth Tax (Central), Calcutta ((1966) 59 I T R 767). (i) In the first case the Federal Court of India while considering the ques tion of legality of certain notices issued under the Income-tax Act held that the income-tax assessment proceedings commence upon issuance of a notice, the foundation of the jurisdiction of the Income-tax Officer to make the assessment or of the liability of the assessee to pay the tax is under sections 3 and 4 of the Income-tax Act which are the charging sections, whereas in section 22 the machinery is provided to determine the amount of tax. It was pointed out that there are three stages in income-tax proceedings, namely :. (1) Declaration of Liability by the Statute ; (2) determination of the liability. in form of an assessment ; and (3) recovery. (ii) Reverting to the second case, it. may be stated in the above case the privy Council while construing the provisions of section 4-A (c) of the Income -tax Act, 1922 held that the liability to tax arises by virtue of the charging section alone, and it arises not later than the close of the previous Year, though quantification of the amount payable is postponed till assessment order is passed. (iii) in the last case referred to hereinabove, the Supreme Court of India while construing the provisions of section 2 (m) of the Wealth Tax Act 1957 by a majority Judgment held that the word "owe" meant to be under an obligation to pay and that the debt owed within the meaning of above section of the Wealth Tax Act could be defined as the liability to pay in present or in future and ascertainable sum of money. It was further held that the charging notion for the purpose of income tax was section 3 of the Indian Income-tax Ate, 19?M, whereas the annual Finance Acts only give the rate foe quantifi cation of the tax amount. It was also held that a liability to pay the income tax was a present liability though the tax became payable after it was quantified in accordance with the ascertainable data. (d) in out view the above cases clearly lay down that the liability of income-tax is relatable to sections 3 and 4 of the Income-tax Act and it comes into existence as soon as the previous year expires though there may not be quantification of the amount by the competent authority till the passing of as assessment order in pursuance of section 22 of the Income-tact Act. A person becomes liable to pay income-tax if he earns an amount exceeding the amount tempted from the payment of income-tax, by virtue of the charging lion of the Income-tax Act, notwithstanding that he is not an assessee or that h has not filed an income-tax return. He is debtor to the Federal Government in this nerd, it tray be pertinent to quote relevant portion of the Supreme Court of Pakistan's judgment in the case of Kohinoor Chemical Ltd. v. Sind Employees Soda. Security Institution, (P L D 1977 S C 197) at p. 336. which roads as follows :- "'Reading the two sections together, it appears to me that once a notification has been issued under subsection (3) of section 1 of the Ordinance notifying the areas, classes of persons and industries or establishments to which the Ordinance is to apply, then the obligations of the employers spelt out in sections 20 and 21 come into play and it is Incumbent upon them to snake the necessary contributions and kW the cry records and furnish the net returns prescribed by the Social Security Institution under rules or regulations made under the Ordinance. These obligations are not dependent upon any action to be taken or initiated on the part of the institution ; on the contrary, they are statutory obligations incurred under the relevant provisions of the Social Security Ordinance.'.

6. In the instant case the respondent-Company made a provision of Rs. 10,09,000 being the income-tax liability. It was open to Wealth tax Officer to ascertain, whether prima facie the above amount was worked out the basis of the income-tax schedule on the income declared by the respondent. Company. It is true that an assessee cannot claim adjustment of an income tax amount at random, however he can claim adjustment of an amount calculated in accordance with the schedule of the income-tax on the income declared by him. Since this aspect has not been adverted to by the Wealth Tax Officer or by the Appellate Assistant Commissioner for Wealth Tax or by the Appellate Income-tax Tribunal, we cannot go into the question as to whether the above figure of Rs. 10,0,000 was a figure arrived at on the basis of the schedule of income-tax then in form on the: declared income.

7. In view of the above discussion our answers to the above two questions are in the affirmative. M.A.K. Order accordingly.