Law:

Section:

Section 2(m) of the Wealth-tax Act, 1957 - Net wealth-assets belonging to assessee - Assessment year 1959-60 - A loan was raised on security of life insurance policies but admittedly utilized to acquire taxable assets - Whether loan amount was to be deducted in arriving at net wealth of assessee - Held, no FACTS The assessee, an invidual, had taken a loan on the security of the life insurance policies and utilized for acquisition of the taxable assets. The assessee claimed that the loan amount taken on strength of insurance policies should be deducted in computing the net wealth. The WTO rejected the assessee's claim and included the loan amount in the net wealth of the assessee. On appeal, the AAC confirmed the order of the WTO. On second appeal, the Tribunal confirmed the order of the AAC. On reference: HELD The amount advanced was converted into assets which were to be included in the net wealth of the assessee as defined by section 2(m ). In computing the net wealth it is only debts which can be excluded. If the amount taken on the life insurance policies is not a debt at all, no question of including it in the aggregate value of any debts, which have to be deducted from the aggregate value of the assets, arises at all. It was not understood as to how the amount continues to enjoy the exemption given by section 5(1)(vi ) even after it had ceased to be a part of the right or interest of an assessee in an insurance policy. If the argument of the assessee was accepted, it would mean that the amount advanced would cease to be a part of the money which would become due and payable by the assessee when the insurance policies mature. The scheme of the Wealth-tax Act is that, when an insurance policy matures, the amount so received will constitute a part of the net wealth of the assessee. If the assessee chooses to capitalise any interest before it actually matures, under an insurance policy and to convert it into assets of a different character, the new assets of a changed character can certainly not continue to enjoy the benefit or exemption conferred by section 5(a)(vi ). That benefit is confined to assets so long as they retain a character upon which exemption…

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