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Impact of Wealth-tax Act, 1957 on interest from bank accounts. Analysis: The case involved a dispute regarding the treatment of interest arising from bank accounts under the Wealth-tax Act, 1957. The assessee, an individual, had fixed deposits with two banks, and the Wealth Tax Officer (WTO) added the accrued interest to the assessee's net wealth for two assessment years. The Commissioner (Appeals) upheld this addition, stating that the accrued interest enhanced the market value of the fixed deposits. However, in the appeal before the Appellate Tribunal, the assessee argued that interest does not accrue until the due date, and therefore, it should not be considered as part of the asset for wealth tax purposes. The revenue contended that interest accrues day-to-day and should be included in the market value of fixed deposits. The Tribunal held that the method of accounting was not relevant in determining whether interest had accrued. It emphasized that interest can only be said to have accrued when it becomes due and payable under the terms of the deposit. In this case, interest accrued only on specific dates mentioned in the deposit terms, and as of the valuation date, no interest had accrued. The Tribunal highlighted that the mere right to sue for interest that had not yet vested could not be considered as property or an asset for wealth tax purposes. The Tribunal also referred to a government circular acknowledging that interest is treated as income only when it is due, not before. Furthermore, the Tribunal noted that even if the interest were to be realized on the valuation date, it would involve foreclosure of the deposit and forfeiture of already accrued interest. The Tribunal pointed out that the rules of the bank did not allow transferability of fixed deposits, which should be considered in determining their market value. Additionally, the Tribunal referenced specific cases and rules to support its decision that interest which had not accrued by the valuation date should not be added to the net wealth of the assessee. Ultimately, the Tribunal allowed the appeal of the assessee and directed the deletion of the estimated interest added to the net wealth for the assessment years in question.
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