2002 (8) TMI 29 - HC - Wealth-tax

Whether the Tribunal was right in holding that the value of annuities purchased by the assessee from the Life Insurance Corporation in respect of remuneration received by him from different producers by paying a single premium insurance is includible in the net wealth of the assessee? - Having regard to this, the fact that though the annuities do constitute an asset of the assessee and are, therefore, liable to the Wealth-tax Act, the extent to which that asset is taxable will have to be worked out by applying the proviso under section 5(1)(vi)--an exercise the Tribunal has not done. - We, therefore, remand the matter to the Tribunal with a direction to compute the extent to which the annuities qualify for exemption under section 5(1)(vi) of the Wealth-tax Act.

Summary

Issues:
1. Inclusion of annuities purchased by the assessee in the net wealth.
2. Interpretation of section 2(e)(2)(ii) of the Wealth-tax Act.
3. Applicability of section 5(1)(vi) of the Wealth-tax Act.

Issue 1: Inclusion of annuities in net wealth
The judgment addressed the question of whether annuities purchased by the assessee from the Life Insurance Corporation should be included in the net wealth. The assessee, a film director, had producers purchase annuities on his behalf, arguing that the market value of these annuities should not be included in his net wealth. The Wealth-tax Officer rejected this claim, which was later upheld by the Tribunal despite a successful appeal to the Commissioner by the assessee.

Issue 2: Interpretation of section 2(e)(2)(ii)
The court analyzed the scope of section 2(e)(2)(ii) of the Wealth-tax Act, which excludes certain annuities from being considered assets. It was noted that the annuities in question were purchased at the instance of the assessee by film producers, making them assets of the assessee and not falling within the exclusion provided in the aforementioned section.

Issue 3: Applicability of section 5(1)(vi)
The judgment delved into the applicability of section 5(1)(vi) of the Wealth-tax Act, which deals with assets not includible in the net wealth of the assessee. The court referred to a Supreme Court case to emphasize the broad interpretation of "any policy of insurance" under this section. It was highlighted that while the annuities were considered assets under the Act, the extent of their taxability needed to be determined by applying the provisions of section 5(1)(vi).

In conclusion, the court ruled in favor of the Revenue and against the assessee regarding the inclusion of annuities in the net wealth. However, the assessee was granted the opportunity to avail the benefit of section 5(1)(vi) for determining the extent of exemption applicable to the annuities. The matter was remanded to the Tribunal with directions to compute this exemption under the specified section of the Wealth-tax Act.