# CALCUTTA v. M/S. STANDARD VACUUM OIL CO. LTD

- **Citation:** [1966] 2 S.C.R. 317
- **Court:** Supreme Court of India
- **Decided:** 1965-10-25
- **Case number:** CIVIL APPELLATE JUR1smcnoN : Civil Appeals Nos. 627 to 628 of 1964
- **Bench:** K. SuBBA RAO, J. C. Shah, S. M. Sikr!
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/calcutta-v-m-s-standard-vacuum-oil-co-ltd-3541
- **Pages:** 5

## Headnote

Wealth Tax Act (27 of I957), ss. 2(111) and 3-Debt owed on va/ua· .
tion date-If includes advance tax due under s. 18A of fncon1e-tax Act,
I922.
Demands in ·respect of the payment of tax under s. ISA of the Income
Tax Act were made 'against the respondent for two years, and the final
instalment for each of the two years, was outstanding on the respective
valuation dates as defined under s. (q) of the Wealth Tax Act, 1957
The respondent claimed that the arrears of tax as determined
as per
notice under s. ISA constituted a debt, owned by it within the meaning
of s. 2(m) of the Wealth Tax Act, as on the valuation date, and that the
amounts shculd be allowed as deduction in
determining its net wealth
under the Wealth Tax Act.
The Appellate Tribunal referred the ques·
tion to the High Court and the High Court answered it in favour of the
respondent.
In appeal to this Court by the Commissioner of Wealth Tax,
HELD : The High Court \Vas right in answering
the
question
in
favour of the respondent.
A debt is owed when an order is passed under s. ISA(l) and a
notice of demand is sent.
The amount mentioned in the notice begins
to be ov,.red till a ne,w figure is substituted by the assessee under s.
18A(2). Till :t new estimate is made
by the assessee,
the amount js
<iscertaincd and there· is a statutory liability on the assessce to pay
the
amount mentioned in the order under s. 18A(l) of the Income Tax Act.
Since, on the valuation dates in the present appeals, the respondent had
not taken any action under s. 18A(2), the amounts
mentioned in the
notices of demand were debts owed within s. 2(m) of the Wealth Tax
Act on the valuation dates. (321 B-C]
CIVIL APPELLATE JUR1smcnoN : Civil Appeals Nos. 627
to 628 of 1964.
Appeals from the judgment and order dated May 14, 1962
of the Calcutta High Court in Wealth Tax Matter No. 154 of
G 1960.
A. V. Visivanatha Sastri, N. D. Karkhanis,
R. H. Dhebar
and R. N. Sachthey, for the appellant.
•
T. A. Ramachandran, J. B. Dadachanji, 0. C. Mathur and
Ravinder Narain, for the respondent.
I
H
The Judgincnt of the Court was delivered by
Sikri, J.
Two questions were referred to the High Court by
the Appellate Tribunal under s. 27 of the Wealth Tax Act (XXVII
318
SUPREME
COURT
REPORTS
[1966] 2 S.C.R.
of 1957). We are only concerned with the second question which
A
reads as follows :
"Whether on the facts and in the circumstances of the
case, in computing the net wealth of the assessee, the
arrears of tax as determined as per notice under Section
18A of the Indian Income Tax Act for the two assessment years under consideration constitute a debt owed
by the assessee within the meaning of section 2(m) of
the Wealth Tax Act as on the valuation date?"
The facts and circumstances of the case are as follows.
B
Demands in respect of the payment of tax under s. 1 SA of the
Indian Income Tax Act were made against the respondent comC
pany, 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 '-ssessee claimed that the demand for such tax should be
D
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 fmm 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
E
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. Commissioner of Wealth Tax (Central), Calcutta('), answered the question in favour of the assessee.
The Rev

## Text

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A
COMMISSIONER OF WEALTH TAX (CENTRAL),
B
c
D
E
F
CALCUTTA
v.
M/S. STANDARD VACUUM OIL CO. LTD.
October 25, 1965
[K. SuBBA RAO, J. C. SHAH AND S. M. SIKR!, JJ.]
Wealth Tax Act (27 of I957), ss. 2(111) and 3-Debt owed on va/ua· .
tion date-If includes advance tax due under s. 18A of fncon1e-tax Act,
I922.
Demands in ·respect of the payment of tax under s. ISA of the Income
Tax Act were made 'against the respondent for two years, and the final
instalment for each of the two years, was outstanding on the respective
valuation dates as defined under s. (q) of the Wealth Tax Act, 1957
The respondent claimed that the arrears of tax as determined
as per
notice under s. ISA constituted a debt, owned by it within the meaning
of s. 2(m) of the Wealth Tax Act, as on the valuation date, and that the
amounts shculd be allowed as deduction in
determining its net wealth
under the Wealth Tax Act.
The Appellate Tribunal referred the ques·
tion to the High Court and the High Court answered it in favour of the
respondent.
In appeal to this Court by the Commissioner of Wealth Tax,
HELD : The High Court \Vas right in answering
the
question
in
favour of the respondent.
A debt is owed when an order is passed under s. ISA(l) and a
notice of demand is sent.
The amount mentioned in the notice begins
to be ov,.red till a ne,w figure is substituted by the assessee under s.
18A(2). Till :t new estimate is made
by the assessee,
the amount js
<iscertaincd and there· is a statutory liability on the assessce to pay
the
amount mentioned in the order under s. 18A(l) of the Income Tax Act.
Since, on the valuation dates in the present appeals, the respondent had
not taken any action under s. 18A(2), the amounts
mentioned in the
notices of demand were debts owed within s. 2(m) of the Wealth Tax
Act on the valuation dates. (321 B-C]
CIVIL APPELLATE JUR1smcnoN : Civil Appeals Nos. 627
to 628 of 1964.
Appeals from the judgment and order dated May 14, 1962
of the Calcutta High Court in Wealth Tax Matter No. 154 of
G 1960.
A. V. Visivanatha Sastri, N. D. Karkhanis,
R. H. Dhebar
and R. N. Sachthey, for the appellant.
•
T. A. Ramachandran, J. B. Dadachanji, 0. C. Mathur and
Ravinder Narain, for the respondent.
I
H
The Judgincnt of the Court was delivered by
Sikri, J.
Two questions were referred to the High Court by
the Appellate Tribunal under s. 27 of the Wealth Tax Act (XXVII
318
SUPREME
COURT
REPORTS
[1966] 2 S.C.R.
of 1957). We are only concerned with the second question which
A
reads as follows :
"Whether on the facts and in the circumstances of the
case, in computing the net wealth of the assessee, the
arrears of tax as determined as per notice under Section
18A of the Indian Income Tax Act for the two assessment years under consideration constitute a debt owed
by the assessee within the meaning of section 2(m) of
the Wealth Tax Act as on the valuation date?"
The facts and circumstances of the case are as follows.
B
Demands in respect of the payment of tax under s. 1 SA of the
Indian Income Tax Act were made against the respondent comC
pany, 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 '-ssessee claimed that the demand for such tax should be
D
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 fmm 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
E
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. Commissioner of Wealth Tax (Central), Calcutta('), answered the question in favour of the assessee.
The Revenue having
obtained · F
certificates of fitness from the High Court filed these appeals in
this Court.
Mr. Viswanatha Sastri, learned counsel for the Revenue,
contends that on a true interpretation of s. l 8A the amount
which is payable under it is not an ascertained amount as the
assessee can estimate the amount which he should pay as advance
tax. He says that the section contemplates more or less the opening of a running account between the State and the assessee and
the exact amount is not finalised till the 15th of March each year,
which is the last date by which the assessee has to exercise his
option to pay the amount demanded or a lesser sum.
He says
that the debt really becomes a debt on the 15th of March when
(l) 48 I.T.R. 49.
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C.W.T. v. S.V.O. (Sikri, J.)
319
A no option is exercised to pay a'lesser sum. In order to appreciate
the contentions of the, learned counsel it is necessary to consider
the relevant statutory provisions first of the Wealth Tax Act and
then of the Income Tax Act.
Section 2(m) of the Wealth Tax
Act defines "net wealth" as follows :
B
c
D
E
F
" 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 this 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; and
(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."
Section 2(q) defines 'valuation date' as "in relation to any year
for which an assessment is to be made under this Act, means the
last day of the previous year as defined in clause (11) of section 2
of the Income-tax Act if an assessment were to be made under
that Act for that year". It is not necessary to set out the proviso
to this definition. Section 3 is the charging section which reads
as follows:
"Subject to the other provisions contained in this
Act, there shall be charged for every financial year commencing on and from the first day of April, 1957, a tax
(hereinafter referred to as wealth-tax) in respect of the
net wealth on the corresponding valuation date of every
individual, Hindu undivided family and company at the
rate or rates specified in the Schedule."
The question with which we are concerned is whether the
amounts directed to be paid by notices of demand dated May 28,
G
1956 and May 31, 1957, are "debts owed" by the assessee within
s. 2(m) on the respective valuation dates.
Now the notices of
demand were issued under s. 18A (1) of the Income Tax Act.
The exact notices of demand which were issued are not on record,,
but the learned counsel drew our attention to the form of notice
prescribed under the Act.
Section 18A ( 1), inter a/ia, provides
H
that the Income Tax Officer may "by order in writing, require
an assessee to pay quarterly to the credit of the Central GovernL2Sup. Cl/66 7
320
SUPREME COURT REPORTS
[1966] 2 S.C.R.
ment on the 15th day of June, 15th day of September, 15th day
A
of December and 15th day of March in that year, respectively,
an amount equal to one-quarter of the income-tax and super-tax
payable on so much of such income as is included in his total
income of the latest previous year in respect of which he has
been assessed." It is not necessary to refer to the rate at which
he has to calculate the tax.
Sub-section (2) of s. 1 SA enables
B
an assessee to formulate his· own estimate of the tax payable by
him if he considers that the income is less than on which he has
been required to pay tax, but he has to send this revised estimate
of the tax payable by him before any one of the dates specified
in sub-s. (l)(a) and adjust excess or deficiency in respect of any
instahnent already paid in a subsequent instalment or in subse- · C
quent instalments.
It is this provision which Mr.· Sastri relies
on strongly to show that the demand under s. lSA(l) is not a
debt owed, within s. 2(m) of the Wealth Tax Act.
He further
refers to sub-s. (5) which provides for payment of simple interest
by the Central Government for any amount paid by the assessee
in accordance with the provisions of s. 1 SA. He says that this
D
shows that it is really the. Government which ultimately becomes
the debtor and there is no question of any debt being owed by
the assessee.
He further urges that the word "debt" connotes a
definite fixed amount and does not include merely a liability to
pay a sum which is not ascertained.
In our opinion, the High Court was right in answering the
question in favour of the assessee.
Section 1SA(l0) provides
that if the assessee does not submit a revised estimate under
sub-s .. (2) of s. 1 SA, and he does not pay on the specified date
any instalment of tax that he is required to pay under sub-s. (1),
E
he shall be deemed to be an assessee in default in respect of such
F
instalment or instalments, and if he does submit a revised estimate
but does not pay an instahnent in accordance therewith on the
date or dates specified in sub-s. (1 ), he shall be deemed to be
an assessee in default in respect of such instalment or instalments.
Under sub-s. (11) any sum paid or recovered from the
assessee in pursuance of the provisions of s. 1 SA is given credit G
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. 1 SA 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
H
a new estimate is m2de by the assessee, the amount is ascertained
and there is a statu~ory liability on the assessee to pay the amount
'
•
•
C.W.T. v. S.V.O, (Sikri, J.)
321
A ·mentioned in the order under s. 18A. We agree with the observations of the Gujarat High Court in Comm:'ssioner of Wealth-Tax
v. Raipur Manufacturing Company(') that "a condition subsequent, tbe 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
B contingent liability." In our opinion, a debt is owed when an order
under s. 18A(l) 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 these appeals, the assessee had not taken any action
under s. 18A(2) and consequently the amounts mentioned in
C
the notices of demand were debts owed within s. 2 ( m) of the
Wealth Tax Act on the valuation dates.
'·
In the result we agree with the Calcutta High Court that the
answer to the question referred to it should be in favour of the
assessee.
The appeals, therefore, fail and are dismissed with
D
costs, one set of hearing fee .
Appeals dismissed.
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{I) 52 I.T.R. 482 at p. 522