HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Commissioner of Wealth-tax, Madras v. K. S. N. Bhatt
Civil Appeal Nos. 384-387 of 1978
[1984] 1 SCR 490 ·
Wealth-tax Act, 1957: sections 2(m), 2(m)(iii)(a), 3 and 27(3) · Gift-tax Act, 1958: sections 3, 13 and 15
Sources & disclosures includedDownload original judgment / order
Two-judge bench; judgment delivered by R. S. Pathak, J. · R. S. Pathak, J. · E. S. Venkataramiah, J.
Assessment years: 1964-65, 1965-66, 1966-67, 1967-68
01 · Facts of the case
In four wealth-tax assessments the assessee claimed deductions for income-tax, wealth-tax and gift-tax liabilities. Some demands were raised only after the valuation dates; two liabilities for 1965-66 were later cancelled on appeal. The Tribunal treated the valuation-date position as conclusive and allowed the claims (SCR pp.490-494; PDF pp.1-5).
02 · Discussion by the Hon’ble Court
A tax liability crystallised under its charging statute even if quantified later, but the amount of the debt followed the ultimate judicial determination. A positive final liability remained deductible as a debt on the valuation date; a liability ultimately reduced to nil was treated as never having produced a debt. Section 2(m)(iii)(a) addressed a subsisting demand under challenge, not a demand finally extinguished (SCR pp.494-496; PDF pp.5-7).
Source: Primary judgment: debt and final-determination reasoning
03 · Judicial decision
Revenue's appeals were allowed in part. The cancelled 1965-66 income-tax and gift-tax amounts were not deductible debts, but the remaining finally positive tax liabilities were deductible even though quantified after the valuation dates.
Source: Primary judgment: decision
04 · Outcome / in whose favour
Mixed. Revenue prevailed for the liabilities ultimately cancelled; the assessee prevailed for the other crystallised and finally positive liabilities.
Source: Primary judgment: mixed outcome
05 · AKHB REVIEW POINT
AKHB analysis: distinguish the date on which a liability legally crystallises from its later quantification, and update any provision for the final appellate outcome. For present accounting or tax positions, use the current statute and applicable recognition rules; the underlying wealth-tax regime is repealed.
Source & verification
Download original judgment / order · Open cited source rendition
Complete seven-page SCR report read in page-preserving text and every page image inspected.
- Exact catalogue hash and seven-page count verified; every page was read and inspected.
- The report verifies all four assessment years and the part-allowance of Revenue's appeals.
Statutory scope
The decision applies the since-repealed Wealth-tax and Gift-tax Acts. It is not current wealth-tax advice.
Later treatment
Source checked 2026-10-12. No comprehensive later-treatment or present-law analogy is claimed.
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