Law:

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Section 2(m) of the Wealth-tax Act, 1957 - Net wealth - Debt owed - Whether loan secured on life insurance policies was not deductible as a debt while computing net wealth - Held, yes FACTS The assessee obtained loans from the Life Insurance Corporation on the basis of the paid-up value of the insurance policies held by the assessee. The assessee claimed deduction of the said loans from his wealth. The WTO disallowed the claim on the ground that the deductions were not admissible as the loans were secured on the life insurance policies, which were not chargeable to tax within the meaning of section 2(m). The Commissioner (Appeals) allowed the assessee's appeal. On the revenue's appeal, the Tribunal held that deduction was not allowable. On reference: HELD In view of decisions of this Court in CWT v. Premnarayan Garg [1982] 134 ITR 315 and CWT v. Narayandas J. Hemain [1983] 143 ITR 87 , it was to be held that a loan secured on the life insurance policy could not be deducted as a debt while computing the net wealth. Note: The case was decided against the assessee. CASES REFERRED TO CWT v. Premnarayan Garg [1982] 134 ITR 315 (MP) and CWT v. Narayandas J. Hemant [1983] 143 ITR 87 (MP). JUDGMENT Sohani, J.-By this reference under s. 27(1) of the W.T. Act, 1957 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion: "Whether, on the facts and circumstances of the case, the loan raised on the security of life insurance policies, but admittedly incurred in relation to the acquiring of the taxable assets, was to be deducted in arriving at the net wealth of the assessee for purposes of the Wealth-tax Act?" The material facts giving rise to this reference briefly are as follows: The assessee is assessed in the status of an individual. During the assessment years in question, the assessee obtained loans from the Life Insurance Corporation on the…

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