TMI Blog1981 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... a purpose which was not exempt from wealth-tax ? " For the assessment year 1974-75, assessment was completed on a net wealth of Rs. 96,000. On going through the records, the WTO found that the assessee had claimed a deduction in the original assessment in respect of a loan amounting to Rs. 35,005 taken from the Life Insurance Corporation of India on the security of his LIC policies under s. 2(m)(ii) of the W.T. Act. The WTO was of the opinion that no deduction from the total wealth was admissible in respect of the loan secured on the insurance policies which were exempted assets. Notice under s. 17(b) of the W.T. Act was issued and in response thereto the assessee filed return of wealth showing the net wealth at Rs. 95,044. The WTO adde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ludes property of every description, movable or immovable, but does not include..." Section 2(e) mentions the properties which are not included in the definition of asset. We need not reproduce all the items which are excluded from the definition of assets in s. 2(e) of the Act because it is not necessary for our purposes to do so. Section 5 describes various assets which are exempted from payment of wealth-tax and which, according to this provision, shall not be included in the net wealth of the assessee. Clause (vi) of s. 5 exempts the right or interest of the assessee in any policy of insurance before the moneys covered by the policies become due and payable to the assessee. A plain reading of s. 2(m)(ii) of the W.T. Act will sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inue the enquiry and find out the destination of the debt or the loan. The question referred to us, therefore, has to be decided without reference to the fact whether the loan was used for a purpose which was not exempt from wealth-tax or for a purpose which was so exempt. Learned counsel for the assessee vehemently contended that cl. (ii) of s. 2(m) refers to such debts only which are secured on any property not chargeable under this Act. According to the learned counsel the right or interest of the assessee's insurance policy was not such an asset because it was chargeable under the Act, though, under s. 5, it was exempted from payment of wealth-tax. Counsel thus suggested that there was a distinction between an asset not chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are not includible for computing net wealth and on which no wealth-tax is payable. Thus, s. 3 read with s. 5 makes it clear that the right or interest of an assessee in an insurance policy is a property not chargeable under this Act. A similar question arose before this court in CWT v. Premnarayan Garg (M.C.C. No. 39/1979 decided on 20-2-1981-[1982] 134 ITR 315). This court, following the decision of the Allahabad High Court in Jiwan Lal Virmani v. CWT [1967] 66 ITR 338, held that a loan secured on life insurance policy could not be deducted as a debt for computing net wealth. The reference was answered in favour of the Department. Following the above decision, we answer this question as follows: " The Appellate Tribunal was not corr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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