Wealth-tax deduction rules: loan secured on life insurance policies was not allowable in computing net wealth.

Loans raised on the security of life insurance policies were held not deductible as liabilities while computing net wealth under the Wealth-tax Act, 1957. The Court applied earlier decisions on wealth-tax computation and treated such a secured borrowing as outside the class of allowable debts, even though the borrowing was connected with acquiring taxable assets. The result was that the assessee could not reduce net wealth by the amount of the loan, and the issue was answered against the assessee.

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Issues: Whether loans raised on the security of life insurance policies, though incurred in relation to acquiring taxable assets, were deductible while computing the assessee's net wealth under the Wealth-tax Act, 1957.

Analysis: The claim for deduction turned on whether a debt secured on life insurance policies could be treated as an allowable liability in computing net wealth. The Court noted that the point was covered by earlier decisions holding that such a loan could not be deducted as a debt for wealth-tax purposes.

Conclusion: The loan secured on life insurance policies was not deductible in computing the assessee's net wealth, and the question was answered in the negative, against the assessee.

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