Compulsory deposits count as net wealth assets and must be valued at face value under the Wealth-tax Act.

Compulsory deposits under the Compulsory Deposit (Income-tax Payers) Act, 1974 were treated as assets includible in net wealth because section 7A, inserted retrospectively, deems them to be deposits with a banking company for exemption purposes under the Wealth-tax Act, 1957. The court held that the statutory deeming fiction did not exclude such deposits from section 2(e), and the exemption already available under section 5(1)(iv) did not require any reduction in their value. The deposits were therefore includible at face value, without discounting.

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Issues: Whether compulsory deposits made under the Compulsory Deposit (Income-tax Payers) Act, 1974 are includible in the assessee's net wealth and, if includible, whether their value is to be taken at face value.

Analysis: Section 7A inserted by the Finance (No. 2) Act, 1980 with retrospective effect from 1 April 1975 deems the amount of compulsory deposit, for purposes of exemption under section 5 of the Wealth-tax Act, 1957, to be a deposit with a banking company. The deposits were treated as property and as an asset falling within section 2(e) of the Wealth-tax Act, 1957. The extent of exemption already available under section 5(1)(iv) did not exclude the compulsory deposit from inclusion in net wealth, and the reasoning of the High Courts relied upon supported full inclusion without discounting the value.

Conclusion: The compulsory deposits were rightly included in the net wealth of the assessee, and their value was to be taken at face value. The question was answered in the affirmative and against the assessee.

Ratio Decidendi: Compulsory deposits deemed to be banking deposits under section 7A of the Wealth-tax Act, 1957 constitute assets includible in net wealth under section 2(e), and their full standing amount is to be taken for valuation without discounting.

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