W.T.A. NO. 121/KB OF 1982-83, DECIDED ON 16TH APRIL, 1988. Versus W.T.A. NO. 121/KB OF 1982-83, DECIDED ON 16TH APRIL, 1988.
ORDER
1. This departmental appeal is directed against the order of learned CIT (A) recorded by him on 9th March, 1983 relating to assessment year 1979-80.
2. The brief facts giving rise to it are that during the relevant assessment year the respondent, an individual, claimed wealth-tax liability of Rs.31,385. However, the Wealth Tax Officer disallowed it. Having been aggrieved and dissatisfied the respondent went up in appeal. It was contended before the learned CIT (A) that the WTO was not entitled to disallow the wealth-tax liability without assigning any reason. The learned CIT (A) allowed appeal with the following observation: -
3. "I have examined the wealth-tax returns and also the order of the WTO. The claim was made in the return and was disallowed in the assessment order without assigning any reason. This action is not sustainable in law. I direct the WTO to allow the claim of wealth-tax liability."
4. This time the department feels aggrieved and has come up in second appeal.
5. Mr. Muhammad Farid, the learned DR, supporting the departmental appeal vehemently argued that the order of learned CIT (A) was not sustainable in law for the simple reason that the wealth-tax liability amounting to Rs.32,385 was nothing but current year's liability hence could not be treated as debt owed under section 2 (m) of the Wealth-tax Act, hereinafter referred to as the Act. Elaborating his arguments Mr. Mohammad Farid argued that the wealth-tax liability was different from income-tax liability inasmuch as the later accrued the moment taxable income was earned but as far as the former was concerned, it would accrue only on the valuation date. In order to fortify his submission, Mr. Mohammad Farid invited our attention to a decision of this Tribunal recorded in WTA No. 88/KB of 1982-83 on 26-5-1986. Mr. Farooq Ali, FCA, the learned counsel for the respondent, on the other hand, vehemently argued that since the wealth-tax liability stood determined on the valuation date, therefore, it accrued within the assessment year hence should have been allowed as deduction.
6. We have heard both the learned DR as well as the learned counsel for the respondent at length. Before we turn to the submission of both the learned representatives of the Department as well as the respondent, let us start our discussion with the definition of net wealth. It reads as under:-
7. "2. Definitions -- In this Act, unless the context otherwise requires .. .. . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . .
(m) "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located belonging to the assessee on the valuation date including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than- '
(i) debts which under Section 6 are. not to be taken into account;
(ii) debts which are secured on-, or which have been incurred in relation to, any asset in respect of which wealth-tax is not payable under this Act;
8. Explanation -- For the purposes of this clause--
(i) any immovable property, other than agricultural land by the spouse or any (minor) child of the assessee shall be deemed to belong to the assessee:
9. Provided that any immovable property so deemed to belong to the assessee shall not be included in the net wealth of the spouse or (minor) child of the assessee;
(ii) "assessee" shall be the spouse determined by the Wealth-tax Officer; and
(iii) where the right, title or interest to or in any immovable property other than agricultural land vests in more than one person, such persons shall, in respect of such property be assessed as an association of persons and the value of such right or interest shall not be included in the net wealth of an individual, (provided wealth-tax is charged on such right, title or interest)".
10. From perusal of this definition it appears that an assessee is entitled' to deduct the amount of debt owned from the aggregate amount of assets computed in accordance with the provisions of the Act which belonged to him or were deemed to belong to him on the valuation date. Since both the aggregate value of the assets and aggregate value of the debt owed is to be determined as it stands on the valuation date, let us, therefore, turn to the definition of this expression. Section (2) clause (p) defines it as under:- 'valuation date' in relation to any year for which an assessment is to be made under this Act, means:-
(p) the last day of the previous year as defined in clause (II) of Section 2 of the Income Tax Act, 1922, or
(ii) the last day of the income years as defined in clause (26) of Section. 2 of the Income Tax Ordinance, 1979. as the case may be, if an assessment were to be made under that Act or Ordinance for that year:
11. "Provided that where, in the case of an assessee there are different previous years under the Income Tax Act, 1922, for different sources of income the valuation date for the purposes of this Act shall be the last day of the last of the previous years aforesaid;"
12. From perusal of this definition it appears that it refers to last day of "previous year" or "income year" as the case may be. We therefore, in order to appreciate the contentions of Mr. Farooq Ali, FCA have) to find out as to when the valuation date would expire.
13. Now as far as the date is concerned, it always expires at the mid-night. Thus, whenever we talk of valuation date we will go to the mid-night of the valuation date. If it is 30th June, it would extend till mid-night of the night falling between 30th day of June and 1st July. Since the assessee has been given the advantage of deducting aggregate value of all the debts owed from the aggregate value of all his assets belonging to him or which are deemed to belong to him in order to work out the net wealth, it is, therefore, necessary to extend the valuation date till its last fraction of second. If we accept the submission of Mr. Farooq Ali, the learned FCA, we will have to stop somewhere before the last fraction of second and thus deprive the assessee of the benefit of some other fraction of second or seconds. In order to illustrate our point we can say that if we-determine --the net wealth and thus tax liability of an assessee at 11-55 p.m. by deducting the aggregate value of the debts owed from the aggregate value of all the assets, we will be leaving room for the arguments that the assessee could have disposed of some of his assets in these five minutes in order to bring down his net wealth. The correct interpretation, therefore, would be that the valuation date would expire at the last fraction of second on the mid-night of 30th June and 1st July. Philosophically speaking it might be correct that last fraction of a second could not be conceived for the simple reason that the time is like of flowing stream of water. However, the end of one date or day and beginning of another is a logical necessity. However, a gap is also unimaginable for the same` reason between an end and a beginning. A date or day would, therefore, end at the beginning of another date or day. Thus, the assessee would have the benefit of last fraction of second. The wealth tax liability therefore, would be determined only on the expiry of the last fraction of second of the night of the 30th June and beginning of the 1st fraction of second of the night of 1st July. Consequently the argument that the wealth tax liability could be determined on the valuation date does not appear to be logically correct. Now as far as the income-tax liability is concerned, it accrues the moment an income, which is chargeable to tax is earned. Only its quantification remains subject to the promulgation of the Finance Act. But for certain purposes even the promulgation of Finance Act is not necessary. Since we are not called upon to decide this issue, it would therefore, be sufficient if we refer to (1975) 31-Tax-1, Kesoram Industries and Cotton Mills v. C.W.T.(A), Central Zone, Calcutta. In which their Lordships of Indian Supreme Court have discussed this aspect in some details. Mr. Mohammad Farid, the learned DR, however has relied upon our decision recorded in WTA. No.88/KB of 1982-83 or, 26th May, 1986. From its perusal it appears that it clinched the issue in his favour when it was observed:-
14. "However,-in case of assessment of wealth-tax which is made on the valuation day which is the last day of the previous year, it cannot bell said that the liability of wealth-tax had already arisen and, thus is in the nature of a debt owned by the assessee."
15. We respectfully agree with aforesaid observation but as mentioned above let us point out that the expression 'valuation date' as discussed by us and 'valuation day' as discussed in above-quoted passage lead to the same effect and there is no anomaly between the two.
16. In view of discussion made above we allow the departmental appeal and hold that the wealth-tax liability of Rs.31,385 could not be allowed during the current year of 1979-80.
17. M.B.A./517/T Appeal allowed.