1981 (2) TMI 37

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..... inafter referred to as " the Act ") at the instance of the department. The question referred for our answer reads as under : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the provisions of section 2(m)(ii) of the Wealth-tax Act, 1957, did not apply to the loan of Rs. 41,588 obtained from the Life Insurance Corporation of .....

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..... by the Tribunal in the appeal by the department holding that s. 2(m)(ii) of the Act was not attracted. As is evident from the question and also from the statement of the case, it is an undisputed position that the loan in question was obtained on the security of the life insurance policies of the assessee. " Net wealth " has been defined in s. 2(m) of the Act which is extracted herein below .....

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..... not be payable in respect of the assets enumerated therein and such assets shall not be included in the net wealth of the assessee. This section so far as relevant for the present purpose reads as under: " 5. Exemption in respect of certain assets.-(1) Subject to the provisions of sub-section (1A), wealth-tax shall not be payable by an assessee in respect of the following assets, and such asset .....

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..... )(vi) of the Act quoted herein above, an insurance policy which has not yet matured for payment is an asset which is exempted from the computation of net wealth. The upshot of the foregoing discussion is that a loan raised on the security of an insurance policy clearly falls within the ken of s. 2(m)(ii) of the Act. In such a setting of the legal position, it has to be held that the loan of Rs. .....

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..... ended to encourage savings by payment towards or investment in insurance policies. If the assessee chooses to withdraw money, directly or indirectly, from the exempted stock of assets, he cannot continue to claim the benefit given by section 5(1) of the Act to stocks of wealth of particular classes. If the assessee repays the 'loan', the amount so repaid will go back into the exempted stock. But t .....

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