COMMISSIONER OF WEALTH TAX Vs. LAXMIPAT SINGHANIA

JUDGEMENT

(1.) THIS is a reference under Section 27(1) of the Wealth-tax Act, 1957, at the instance of the Commissioner of Wealth-tax, Kanpur. The following question has been referred to us:

(2.) THE assessee is a Hindu undivided family. Lala Laxmipat Singhania is its karta. He had a share in a partnership firm of the name and style of Messrs. J. K. Bankers. For the purpose of computing the total wealth of the assessee's family its share in the wealth of the firm had to be taken into consideration. While computing such a share the Wealth-tax Officer took the net wealth of the firm as per its books of accounts ignoring its liability on account of the outstanding income-tax dues. THE assessee contended that the income-tax liability of the firm should have been deducted out of its wealth in order to arrive at the net wealth of the firm. THE Appellate Assistant Commissioner of Income-tax took the same view on appeal on the ground that under Sub-clauses (a) and (b) of Clause (iii) of Section 2(m) of the Wealth-tax Act the old income-tax liability could not be deducted. On second appeal the Income-tax Appellate Tribunal reversed the finding of the Appellate Assistant Commissioner of Income-tax and held that Section 2(m) was not applicable and the outstanding income-tax liability of the firm even if old was deductible while computing its net wealth.

(3.) WE accordingly answer the question in the negative, in favour of the assessee and against the department. The assessee is entitled to its costs which we assess at Rs. 200.