1987 (1) TMI 123 - AT - Wealth-tax

Summary

Issues:
1. Inclusion of deposits under CDS (IT payers) Act, 1974 in the assessee's wealth.
2. Whether the deposit under CDS should be discounted for inclusion in the assessee's net wealth.
3. Treatment of loan from LIC as a debt in the computation of wealth.

Issue 1: Inclusion of deposits under CDS Act:
The controversy revolved around whether deposits under the CDS Act should be included in the assessee's wealth. The Revenue argued that a previous decision by the Tribunal held that such deposits were not annuities but rather bank deposits, hence should be included. The assessee contended that the definition of annuity could include variable sums and highlighted conflicting interpretations. The Special Bench held that an annuity must be a fixed sum payable periodically, citing various legal precedents. Consequently, the Tribunal concluded that deposits under CDS were not annuities and should be included in the assessee's net wealth.

Issue 2: Discounting of deposits under CDS Act:
The Special Bench rejected the argument for discounting deposits under the CDS Act for inclusion in the assessee's net wealth. It noted that such deposits were akin to bank deposits, earning interest and repayable in installments, with the possibility of a full refund by the ITO in exceptional circumstances. The assessee's reliance on cases involving discounting of other types of deposits was deemed inapplicable due to the absence of onerous restrictions on the repayment of CDS deposits. Therefore, the Tribunal agreed with the Special Bench that there was no basis for discounting the deposits under CDS for wealth tax purposes.

Issue 3: Treatment of loan from LIC as a debt:
The dispute centered on whether a loan from LIC should be considered a debt in the computation of wealth. The Revenue contended that the loan was utilized for acquiring non-taxable assets, thus should not be allowed as a deduction. The Tribunal referred to legal precedents emphasizing that if the debt was incurred in relation to property not subject to wealth tax, it could not be claimed as a deduction. As the inclusion of the LIC loan in the net wealth was unclear in the computation, the matter was remanded to the WTO for a fresh examination in light of established legal principles.

In conclusion, the Tribunal partly allowed the Revenue's appeals, affirming the inclusion of deposits under the CDS Act in the assessee's wealth, rejecting the discounting of such deposits, and remanding the decision on the treatment of the LIC loan as a debt for further assessment.