Kerala H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee is entitled to claim deduction of the provision made for purchase tax in the year 1981-82 on the basis of the provisional assessment to sales-tax for 1976-77 ?

High Court Of Kerala

Commissioner Of Wealth Tax vs. A.M. Moosa

Section 2(M)

Asst. year 1981-82

S. Sankarasubban & Kumari A. Lekshmikutty, JJ.

IT Ref. No. 165 of 1998

28th February, 2001

Counsel Appeared

P.K.R. Menon & George K. George, for the Applicant : C. Kochunny Nair, for the Respondent

JUDGMENT

S. SANKARASUBBAN, J. :

This reference is at the instance of the Revenue and is under s. 27(3) of the WT Act, 1957. The question of law referred is as follows :

“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee is entitled to claim deduction of the provision made for purchase tax in the year 1981-82 on the basis of the provisional assessment to sales-tax for 1976-77 ?”

The facts of the case is as follows : The assessee filed his return of wealth for the asst. yr. 1981-82 and claimed deduction of Rs. 6,43,499. This amount was described as the amount for purchase tax relating to the year 1976-77. The WTO disallowed the claim on the ground that the Government of Kerala had exempted marine products from levy of purchase tax during the relevant accounting period and held that the provision was not against any real or ascertained liability. Aggrieved by the order of the WTO, the assessee preferred an appeal before the CWT(A). The CWT(A) confirmed the order of the WTO.

The assessee filed a second appeal before the Tribunal. The Tribunal set aside the order of the CWT and restored the matter to the WTO with a direction to decide the issue afresh in the light of the facts described in the order. The assessee was directed to produce the provisional sales-tax assessment order for the asst. yr. 1976-77 before the WTO and the WTO was directed to allow as a deduction the provision made for purchase tax for the year under appeal on the basis of the provisional sales-tax assessment order for 1976-77. Before the Tribunal, the Department contended that even according to the assessee’s liability ceased to exist only in the year 1982 when the final order of sales-tax assessment was passed. According to the Revenue, the liability was not existing when the final sales-tax assessment order was passed. The liability related back to the asst. yr. 1976-77. Hence, according to the Revenue, there was no liability at all during the intervening period.

We heard learned counsel for the Revenue Sri. P.K. Ravindranatha Menon and learned counsel for the assessee Sri C. Kochunni Nair. Sri. Ravindranatha Menon brought to our notice a decision of the Supreme Court in CWT vs. K.S.N. Bhatt (1983) 37 CTR (SC) 273 : (1984) 145 ITR 1 (SC) : TC 64R.739. That case relates to WT Act. Learned counsel brought to our notice the following observations from the above judgment. “the fact that the assessee had filed appeals subsequent to the valuation dates and that relief had been granted by the appellate authority would have no relevance for determining whether a debt was owned on the relevant valuation date. Reference was made to the decision of the Madras High Court in Late P. Appavoo Pillai vs. CWT (1973) 91 ITR 138 (Mad) : TC 64R.793. We are unable to agree with the view taken by the Tribunal. Whether a debt was owed by the assessee on the valuation date would depend, as was observed by this Court in Kesoram Industries & Cotton Mills Ltd. vs. CWT (1966) 59 ITR 767 (SC) : TC 64R.687 and H.H. Setu Parvati Bayi vs. CIT (1968) 69 ITR 864 (SC) : TC 64R.815 on the fact that a liability had already crystallised under the relevant taxing statute on the valuation date. An income-tax liability crystallises on the last day of the previous year relevant to the assessment year under the IT Act, a wealth-tax liability crystallises on the valuation date for the relevant assessment year under the WT Act and a gift-tax liability crystallises on the last day of the previous year for the relevant assessment year under the G.T. Act…….. Now, the quantification of the income-tax, wealth-tax or gift-tax liability is determined by a corresponding assessment order, and even if the assessment order is made after the valuation date relevant to the wealth-tax assessment in which the claim to deduction is made, there is a debt owed by the assessee on the valuation date. The quantification effected by an assessment order may be varied as the income-tax, wealth-tax and gift-tax case is carried in appeal to the AAC, or thereafter to the Tribunal, and indeed even in reference later to the High Court or subsequent appeal to this Court. It is the quantification of the tax liability by the ultimate judicial authority which will determine the amount of the debt owed by the assessee on the valuation date. So long as such ultimate determination indicates the existence of a positive tax liability, it must be held that there is a debt owed by the assessee on the valuation date even though such determination may be subsequent in point of time to the valuation date. If, however, it is found on such ultimate determination that there is no tax liability, it cannot be said that merely because originally a tax liability had been determined and stood existing on the valuation date there was a debt owed by the assessee. The fact cannot be ignored that when the case was carried in appeal or reference it was found by the superior authority that in fact there was no tax liability at all. That final determination, even though render after the valuation date, directly relates to the question whether on the valuation date there was a debt owed by the assessee. If the finding is that there was no tax liability, it must be held that there was no debt owed by the assessee on the valuation date. In this regard, we do not agree with what has been said by the Madras High Court to the contrary in Late P. Appavoo Pillai (supra).

Learned counsel for the respondents brought to our notice two decisions in Baby Marine Exports vs. CIT (1997) 225 ITR 631 (Ker) : TC S16.1694 and CIT vs. A.M. Moosa (1998) 146 CTR (Ker) 718 : (1997) 227 ITR 688 (Ker) : TC S16.1996. According to us, the above decisions are not relevant for the present case and the decision of the Supreme Court is with respect of s. 2(m)(iii)(a) of the WT Act.

In the above view of the matter, we answer the question in the negative and against the assessee. IT reference is disposed of.

[Citation : 249 ITR 395]

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