Case: Commissioner Of Wealth Tax (Central)Calcutta Vs. M/S. Standard Vacuum Oil Co. Ltd

2. The facts and circumstances of the case are as follows. Demands in respect of the payment of tax under S. 18A of the Indian Income-tax Act were made against the respondent company, M/s. Standard Vacuum Oil Co. Ltd., for the two years ending December 31, 1956 and December 31, 1957, by notices of demand dated May 28 1956 and May 31, 1957, respectively. The final instalment of the amount of Rs. 47, 69, 653 for each of the two years was outstanding on the respective valuation dates. The assessee claimed that the demand for such tax should be allowed as deduction in determining the net wealth of the assessee under the Wealth Tax Act. The Appellate Tribunal held that this sum should be deducted from the total computation of wealth if the said amount was outstanding for less than a year. It further held that the demand created under S. 18A of the Income-tax Act was a debt owed by the assessee, and it directed the Wealth Tax Officer to ascertain "whether the demand referred to in this case was outstanding for less than one year on the valuation date and if so, he will allow the same as a deduction." The High Court, following its decision in Assam Oil Co. Ltd. v. Commr. of Wealth Tax (Central) Calcutta, (1963) 48 ITR 49  : (AIR 1963 Cal 112  ) answered the question in favour of the assessee. The Revenue having obtained certificates of fitness from the High Court filed these appeals in this Court.

Reasoning: 5. In our opinion, the High Court was right in answering the question in favour of the assessee Section 18A (10) provides that if the assessee does not submit a revised estimate under sub-section (2) of S. 18A, and he does not pay on the specified date any instalment of tax that he is required to pay under sub-section (1), he shall be deemed to be an assessee in default in respect of such instalment or instalments, and if he does submit a revised estimate but does not pay an instalment in accordance therewith on the date or dates specified in subsection (1), he shall be deemed to be an assessee in default in respect of such instalments. Under sub-section (11) any sum paid or recovered from the assesee in pursuance of the provision of S. 18A is given credit towards the tax due in respect of the appropriate year. We cannot find any substantial difference between advance tax paid under the provisions of S. 18A and tax due and paid under a demand notice passed after an assessment. The only difference is that if the facts so warrant, the assessee is enabled to pay less than the amount demanded by the Income-tax Officer. But till a new estimate is made by the assessee, the amount is ascertained and there is a statutory liability on the assessee to pay the amount mentioned in the order under S. 18A. We agree with the observations of the Gujarat High Court in Commr. of Wealth Tax v. Raipur Manufacturing Co., Ltd., (1964) 52 ITR 482   at p. 522: (AIR 1964 Guj 154   at p. 174) that a condition subsequent, the fulfilment of which may result in the reduction or even extinction of liability, would not have the effect of converting the liability which attaches under such notice under S. 18A into a contingent liability." In our opinion a debt is owed when an order S. 18A(1) is passed and a notice of demand sent. The amount mentioned in the notice begins to be owed till a new figure is substituted by the action of the assessee. On the valuation dates in the appeals, the assessee had not taken any action under S. 18A(2) and consequently the amounts mentioned in the notices of demand were debts owed within 2(m) of the Wealth Tax Act on the valuation dates.