1973 (4) TMI 24 - HC - Wealth-tax

Wealth Tax Act, 1957 - assessee was entitled to monthly instalments of annuity for thirty-five years from a specified date - Whether entire value of annuities can be included in net wealth of the assessee after that specified date

Summary

Issues Involved:
1. Whether the right or interest of the assessee in the annuity policy is exempt from wealth-tax under Section 5(1)(vi) of the Wealth-tax Act, 1957.
2. Interpretation of the terms "any policy of insurance" under Section 5(1)(vi) of the Wealth-tax Act.
3. Applicability of the Supreme Court decision in Chandulal Harjiwandas v. Commissioner of Income-tax.

Detailed Analysis:

1. Exemption under Section 5(1)(vi) of the Wealth-tax Act:
The primary issue was whether the right or interest of the assessees in their respective annuity policies was exempt from wealth-tax under Section 5(1)(vi) of the Wealth-tax Act, 1957. The Wealth-tax Officer had included the value of the annuity policies in the assessees' net wealth, but the Appellate Assistant Commissioner allowed the exemption, which was upheld by the Income-tax Appellate Tribunal. The High Court had to determine if the annuity policies fell within the ambit of "any policy of insurance" under Section 5(1)(vi).

2. Interpretation of "Any Policy of Insurance":
The court examined the definition of "assets" under Section 2(e) of the Wealth-tax Act and noted that the policies in question were assets as they did not preclude commutation into a lump sum. The court then analyzed Section 5(1)(vi), which exempts the right or interest in any policy of insurance before the moneys become due and payable. The court found that the term "any policy of insurance" was not specifically defined in the Wealth-tax Act but referred to the broader definition of "life insurance business" under Section 2(11) of the Insurance Act, 1938, which includes annuities upon human life.

The court rejected the revenue's argument that the lump sum payment for the annuity policies disqualified them from being considered as insurance policies. The court emphasized that the legislative intent behind the exemption was to encourage investments in insurance policies, which contribute to national wealth and public investments.

3. Applicability of Supreme Court Decision:
The court considered the Supreme Court decision in Chandulal Harjiwandas v. Commissioner of Income-tax, which dealt with the exemption of life insurance policies under Section 15(1) of the Income-tax Act, 1922. Although the language of Section 15(1) of the Income-tax Act differed from Section 5(1)(vi) of the Wealth-tax Act, the court noted that the Supreme Court's interpretation that the main purpose of the policy should be considered was relevant. The court concluded that the annuity policies in question were indeed policies of insurance and thus exempt under Section 5(1)(vi) of the Wealth-tax Act.

Conclusion:
The court held that the annuity policies were covered by the exemption under Section 5(1)(vi) of the Wealth-tax Act. However, only the amounts that had become due and payable during the assessment years could be subjected to wealth-tax. Since the specific amounts due and payable were not clear from the records, the wealth-tax authorities were directed to calculate the wealth-tax accordingly, if permissible by law. The questions referred to the court were answered in the affirmative and in favor of the assessees, with no order as to costs.

Separate Judgments:
Both judges concurred with the judgment, and there were no separate judgments delivered.