A SIVASAILAM Vs. COMMISSIONER OF WEALTH TAX

JUDGEMENT

(1.) IN accordance with the direction given by this court in T. C. P. Nos. 546 to 548, 556 and 557 of 1982, dated April 11, 1983, the Tribunal referred the following questions for the opinion of this court, in the case of both the assessee as well as the Department, under section 27(3) of the Wealth-tax Act, 1957 Tax Cases Nos. 864 to 869 of 1984 "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the estate duty liability of Rs. 1, 66, 48, 868 cannot be allowed as a deduction and the value of shares has to be only on the basis of the 'book values' of assets/liabilities as indicated in the books on the valuation date?. 2. Whether the Tribunal was right in restricting the deduction of estate duty liability to Rs. 65, 50, 453 (only being the provisional demand) as against Rs. 1, 66, 48, 868 being the estate duty finally determined as payable, in valuing the share of Amalgamations Ltd.?.3. Whether the Tribunal was right in restricting the deduction to Rs. 35, 50, 453 being the balance of provisional demand of estate duty, as against Rs. 1, 36, 48, 868 being the balance of estate duty finally determined as payable in valuing the shares in Amalgamations Ltd.? "Tax Cases Nos. 870 and 871 of 1984".1. Whether, on the facts and in the circumstances of the case and having regard to Circular No. 2(WT) of 1967 (see [1973] 92 ITR(St) 2), dated October 31, 1967, and Circular No. 118 (see [1973] 92 ITR(St) 1), dated September 15, 1973, the Tribunal was right in holding that the estate duty liability of the late S. Anantharamakrishnan as on the valuation dates relevant for the assessment years 1966-67 and 1967-68 should be deducted while arriving at the valuation of the shares of the assessee in Amalgamations Ltd., Madras?.

(2.) WHETHER the Tribunal's view that the estate duty liability belonged to the company and that the liability should be taken as shown in the balance-sheet as it appeared in the directors' report is sustainable in law?" * The assessee is the estate of the late S. Anantharamakrishnan represented by A. Sivasailam as the administrator of the estate. The estate has 100 per cent. beneficial ownership in shares of Amalgamations Ltd. The dispute relates to the valuation of unquoted equity shares in Amalgamations Ltd.

(3.) THE Wealth-tax Officer was not prepared even to reckon the note to the profit and loss account or the directors' report for the last year where specific further liability of Rs. 35, 50, 453 after payment of Rs. 30 lakhs was mentioned. Only Rs. 30 lakhs, which was actually debited in the profit and loss account for the third year was reckoned because it was already debited in the accounts. He did not make any adjustment for estate duty. Hence, the assessee filed appeals to the Commissioner of Income-tax (Appeals)THE first appellate authority for the proposition that amounts payable much later either in instalments or otherwise, are also a liability in praesenti and not a contingent liability, and, therefore, to be reckoned as such, placed reliance upon the decisions in CWT v. Kantilal Manilal 1973 (88) ITR 125 (Guj) and CWT v. Ranganayaki Gopalan 1973 (92) ITR 529 (Mad). In the opinion of the first appellate authority, estate duty being a charge on the assets of a controlled company is an allowable deduction, since that liability was brought on record for all the three years in the directors' report, though it was not so in so far as the first year is concerned. According to the Commissioner of Income-tax (Appeals) once it is mentioned in the report a prospective buyer would take cognizance of the same, and as such the liability could be an allowable deduction. THE Commissioner of Income-tax (Appeals) was also of the view that the circular, dated October 31, 1967, authorised adjustments for "non-recurring and extraordinary items of incomes and expenditure and losses" * . In this view of the matter, the Commissioner of Income-tax (Appeals) allowed the appeals by a common order. Aggrieved, the Department filed appeals against this common order before the Tribunal. Before the Tribunal, the Department contended that for the various reasons stated by it, the orders passed by the Wealth-tax Officer in all the three assessment years under consideration should be restored.