Compulsory Deposit Scheme deposits are not annuities for wealth-tax purposes; exemption depends only on the specific statutory deeming provision.

A compulsory deposit under the Compulsory Deposit Scheme is not an annuity for wealth-tax purposes because the yearly payments are treated as instalments of principal and interest, not periodic annuity receipts. The article also notes that any exemption for such deposits must come from the specific deeming relief under section 7A, read with section 5, rather than from the general exclusion for annuities in section 2(e)(2)(ii) of the Wealth-tax Act. Earlier contrary reasoning was rejected, and the deposit was treated as part of taxable wealth subject only to the limited statutory exemption provided by the scheme.

---

---

Issues: Whether deposits under the Compulsory Deposit Scheme are exempt from wealth-tax as an annuity under section 2(e)(2)(ii) of the Wealth-tax Act, and whether the assessee could claim exemption only under the specific statutory scheme under section 5(1)(xxvi) read with section 7A.

Analysis: The Special Bench decision reversing the earlier view was preferred, and the deposit under the Compulsory Deposit Scheme was held not to be an annuity in the eye of law because the yearly payments represented instalments of principal and interest. The decision was supported by later High Court rulings holding that such deposits do not fall within the annuity exclusion in the definition of assets. The scheme also contains a specific deeming exemption under section 7A for the limited purpose of section 5 of the Wealth-tax Act, showing that the deposits were not otherwise exempt as annuities. The earlier view treating the deposit as an exempt annuity was declined.

Conclusion: The assessee was not entitled to exemption under section 2(e)(2)(ii) as an annuity, and the Revenue's contention was accepted.

Final Conclusion: The relief granted by the first appellate authority was set aside and the Compulsory Deposit Scheme deposit was held to be taxable in wealth, subject only to the specific exemption available under the statutory scheme.

Ratio Decidendi: A compulsory deposit under the scheme is not an annuity for wealth-tax purposes, and exemption, if any, must arise from the specific deeming provision and not from the general definition of assets.

---