Net wealth computation excludes loans secured on exempt life insurance policies under the Wealth-tax Act.

A loan raised on the security of a life insurance policy is not deductible in computing net wealth under the Wealth-tax Act, 1957, because the underlying policy itself is excluded from net wealth under section 5(1)(vi) read with section 2(m)(ii). The substitution of the word "chargeable" for "payable" in the relevant provision made no material difference to that position. The loan amount therefore could not reduce the assessee's net wealth, and the issue was answered against the assessee.

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Issues: Whether a loan taken against the security of a life insurance policy can be deducted in computing the assessee's net wealth under the Wealth-tax Act, 1957.

Analysis: A life insurance policy is excluded from the assessee's net wealth under section 5(1)(vi) read with section 2(m)(ii) of the Wealth-tax Act, 1957. On that statutory scheme, a debt raised on the security of such an excluded asset does not become deductible in computing net wealth. The change in expression from "payable" to "chargeable" in the relevant provision was held to make no material difference to the legal position.

Conclusion: The loan amount could not be deducted in computing the assessee's net wealth and the question was answered in the negative, against the assessee and in favour of the Revenue.

Ratio Decidendi: Where the underlying asset is excluded from net wealth, a loan secured on that asset is not deductible in the computation of net wealth, and no material distinction arises from the substitution of "chargeable" for "payable" in the statutory wording.

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