Accrued dividend counts as wealth, but statutorily deferred interest is excluded from net wealth.

An accrued and enforceable right to receive deferred dividend is treated as an asset for wealth-tax purposes, so the declared dividend, after deduction of tax at source, was includible in net wealth. The attempted discounting of the gross dividend to present value was not accepted on the facts stated. By contrast, where the temporary dividend restriction legislation postponed the very accrual of interest instalments until the expiry of specified periods, those instalments were not assets held on the valuation date and were not includible in net wealth.

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Issues: (i) whether the deferred dividends, after reduction of tax deducted at source, were includible in the assessee's net wealth without any discount; (ii) whether the first and second instalments of interest on the deferred dividend, made payable under the temporary dividend restrictions legislation, were assets held by the assessee on the valuation date and were includible in net wealth.

Issue (i): whether the deferred dividends, after reduction of tax deducted at source, were includible in the assessee's net wealth without any discount.

Analysis: The statutory scheme prohibited excess dividend distribution for a fixed period, later permitting declaration of dividend but postponing its payment. Once declared, the dividend represented an accrued right to receive payment, though the payment was deferred. For wealth-tax purposes, the relevant asset was the accrued right itself. The system of accounting was irrelevant, and the total declared dividend had to be taken as an asset, subject to reduction for tax deducted at source. The attempted discounting of the gross dividend to arrive at a present value was not justified on the facts before the Court.

Conclusion: The declared dividend, as reduced by tax deducted at source, was includible in the assessee's net wealth. The question of discounting was not finally answered and was left for reconsideration by the Tribunal.

Issue (ii): whether the first and second instalments of interest on the deferred dividend, made payable under the temporary dividend restrictions legislation, were assets held by the assessee on the valuation date and were includible in net wealth.

Analysis: The legislation postponed not merely the payment of interest but its very accrual, by providing that the instalments of interest would become due and payable only on the expiry of the specified periods. Since accrual itself was deferred, the interest could not be treated as an asset held by the assessee on the valuation date.

Conclusion: The interest instalments were not includible in the assessee's net wealth.

Final Conclusion: The reference was answered partly in favour of the assessee: the declared dividend, after deduction of tax at source, formed part of net wealth, while the deferred interest did not.

Ratio Decidendi: An accrued and enforceable right to receive dividend is an asset includible in net wealth, but interest that is statutorily deferred so that its accrual itself is postponed does not constitute an asset on the valuation date.

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