Deferred annuity policies treated as life insurance, leaving the right or interest exempt from wealth-tax until payment becomes due.

A deferred annuity policy contingent on human life was treated as a policy of insurance for wealth-tax purposes, so the assessee's right or interest in such a policy fell within the exemption in section 5(1)(vi) of the Wealth-tax Act, 1957. The expression "any policy of insurance" was given a wide meaning and was not confined to ordinary life policies. The 1975 proviso was not read as narrowing the main exemption to exclude annuity policies, and the Act was construed harmoniously so that commutable life annuities could still qualify for exemption until the policy moneys became due and payable.

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Issues: Whether the right or interest of an assessee in a deferred annuity policy is exempt from wealth-tax under section 5(1)(vi) of the Wealth-tax Act, 1957.

Analysis: The expression "any policy of insurance" in section 5(1)(vi) was held to be of wide import and not confined to ordinary life policies. A deferred annuity policy, where the annuity is payable on the contingency of human life and the contract contains a life-contingent element, was treated as a species of life insurance. The Court further held that the proviso inserted in 1975 did not narrow the main exemption so as to exclude annuity policies, and that section 2(e)(iv), read harmoniously with sections 5(1)(via) and 5(1)(vii), did not require a restrictive construction. The scheme of the Act showed that commutable annuities on life could still fall within the exemption under section 5(1)(vi).

Conclusion: The right or interest in the deferred annuity policies was exempt from wealth-tax, and the question was answered in favour of the assessees.

Ratio Decidendi: A deferred annuity policy dependent on human life is a policy of insurance within section 5(1)(vi) of the Wealth-tax Act, 1957, and its right or interest is exempt from wealth-tax until the moneys under the policy become due and payable.

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