1991 (3) TMI 5 - HC - Wealth-tax

Summary

Issues Involved:
1. Deduction of estimated amount of capital gains tax.
2. Inclusion of "compulsory deposit" in computing net wealth.

Summary:

1. Deduction of Estimated Amount of Capital Gains Tax:
The first issue was whether the assessee was entitled to a deduction of the estimated amount of capital gains tax. The court referred to its previous judgment in Smt. Vinita Devi Singhania v. CWT [1991] 191 ITR 233 (Cal), delivered on February 18, 1991, and answered the question in the affirmative, in favor of the Revenue.

2. Inclusion of "Compulsory Deposit" in Net Wealth:
The second issue concerned whether the "compulsory deposit" should be included in the computation of the assessee's net wealth. The assessee claimed that the amount deposited under the Compulsory Deposit Scheme should not be included in her wealth. The Tribunal, following the order of the Special Bench in the case of Sushilaben A. Mafatlal v. WTO, rejected the assessee's claim.

The court examined whether the repayment of compulsory deposit could be treated as an annuity u/s 2(e) of the Wealth-tax Act. Dr. Pal, representing the assessee, argued that the compulsory deposit met the definition of an annuity as it was repayable in five equal annual installments with fixed interest. However, the Revenue contended that compulsory deposits did not equate to annuities.

The court noted that annuities are typically fixed sums paid periodically and not subject to variation. The compulsory deposit under the Compulsory Deposit Scheme Act was deemed a deposit, not an annuity, as it involved a fixed proportion of capital and variable interest rates. Additionally, the court highlighted that the introduction of section 7A in the Compulsory Deposit Scheme Act, which granted exemption u/s 5 of the Wealth-tax Act, indicated legislative intent to treat such deposits as assets, not annuities.

The court concluded that the compulsory deposit did not qualify as an annuity and should be included in the net wealth of the assessee. The second question was answered in the affirmative, in favor of the Revenue.

Conclusion:
Both issues were resolved in favor of the Revenue, affirming that the assessee was not entitled to the deduction of the estimated capital gains tax and that compulsory deposits should be included in the computation of net wealth. There was no order as to costs.