SRINIVASAN T V Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) AT the instance of the assessee, the following two questions have been to this court by the Tribunal for its opinion under s. 27(2) of the W.T. Act, 1957 :

(2.) THE assessee obtained a loan of Rs. 28,000 by mortgaging his house property at No. 3, Ganesh Street, Gopalpuram. He also obtain a loan of Rs. 24,485 from the Life Insurance Corporation on his insurance policy. In the wealth-tax proceedings for the year 1974-75, the assessee claimed a deduction in relation to the aggregate sum of Rs. 52,485, on the ground that they are debts owned by him on the valuation date and that, therefore, they should be deducted. THE WTO, however, rejected the claim on the ground that the debts and been secured against exempted assets and that, therefore, they cannot be deducted in computing the net wealth of the assessee in view of s. 2(m)(ii) of the W.T. Act. Aggrieved by the decision of the WTO, an appeal was filed before the AAC, but without success. THEreafter, the matter was taken to the Tribunal. THE Tribunal, following its earlier decision rendered in the assessee's own case for the earlier assessment year 1973-74, negatived the claim of the assessee. Aggrieved by the view taken by the Tribunal, on this aspect of the matter, the assessee his raised the question No. 1 referred to supra.

(3.) APART from these decisions which take the view that advance tax paid cannot either be treated as deposit with the Government or a reserve, we also feel that having regard to the statutory provisions which compel the assessee to pay advance tax and make the non-payment of advance tax penal, the amount of advance tax or excess advance tax paid in pursuance of a statutory compulsion, cannot be taken to be a deposit. As a matter of fact, the learned counsel for the Revenue, does not seek to support the reasoning given by the Tribunal for taking the view that the excess advance tax is an asset of the assessee and that it has to be included in his net wealth. Mr. Jayaraman, the learned counsel for the Revenue, however, seeks to support the view taken by the Tribunal by a different reasoning which appears to us to be consistent with the statutory provisions. According to him, not only the excess advance tax, but the entire advance tax paid has to be treated as an asset of the assessee on the valuation date and the same time, the entire liability towards income-tax should be taken as debt owned to the State. If such a calculation is made, the fees advance tax paid will fall on the assets side and naturally it will be included in the net wealth of the assessee. The learned counsel for the assessee contends that it is not possible to treat the entire advance income-tax paid as an asset of the assessee and such an assessment will run contra to the various provisions of the Act dealing with the payment of advance income tax. According to the learned counsel for the assessee, the advance tax is only paid as tax and it can never be treated as an asset of the assessee under any circumstances and the learned counsel relies on certain decisions to show that the advance tax paid is a tax and it cannot be taken to be a payment towards a future liability and it should be treated as having the same character as tax. But it is not necessary to refer to the said decisions, for s. 219 of the I.T. Act itself clearly states that any sum paid as advance tax under Chapter XVII of the I.T. Act shall be treated as part of the tax in respect do the assessment year next following the financial year in which it is payable. Having regard to the said specific provision, it is unnecessary to refer to the decisions for establishing the proposition that advance tax is a payment of tax for the relevant accounting year. But the fact that the advance tax paid is treated as a tax under s. 219 of the I.T. Act does not throw any light on the question as to whether the excess advance tax paid by him is an asset includiable in his net wealth. Section 219 of the I.T. Act itself after treating the advance tax as a tax, proceeds to say that credit for the same will be given to the assessee in the regular assessment. This provisions for giving credit to the advance tax paid at the stage of the regular assessment indicates that the advance tax paid is a tentative payments towards tax which gets adjusted at the time of the regular assessment. The proviso to s. 219 of the I.T. Act provides for a credit being given for advance tax paid even at the state of the provisional assessment under s. 141A of the I.T. Act and in this case, there has been a provisional assessment on the assessee on November 6, 1974. At the time of the provisional assessment, it has been found that the assessee has paid excess advance tax of Rs. 11,676. The learned counsel for the assessee contends that once an amount is paid as tax, the disposing power of the assessee over the moneys paid as advance tax is completely and irretrievably lost and, therefore, it cannot be treated as continuing to be an asset of the assessee. But having regard to s. 219 of the I.T. Act which provides for a credit being given to the assessee for the payment of advance tax at the stage of the regular assessment, the payment of advance tax cannot be taken to be a final payment towards tax as contended by the learned counsel for the assessee. Giving credit at the stage of the regular assessment or at the stage of the provisional assessment under s. 141A of the I.T. Act as provided under s. 219 of the said Act, will arise only if the assessee is entitled to the credit, that is, when he is the owner of the amount paid which has to be given credit. The fact that s 219 of the Act contemplates credit being given to the assessee for his payment towards advance tax at the time of the regular assessment, shows that the Legislature intended that the advance payment of tax is tentative payment towards a liability and after the assessee's actual liability is determined at the stage of the regular assessment, the assessee will get the credit for the advance tax paid earlier as required under the provisions of the I.T. Act.