Unaccrued fixed deposit interest is not wealth-tax asset unless it has accrued and become due

Interest on fixed deposits becomes includible in net wealth for wealth-tax purposes only when it has accrued and become due on the valuation date. Unaccrued interest that has not vested in the assessee is not a present enforceable claim; at most it is a future possibility or a non-transferable right to sue, which does not amount to property under section 6(e) of the Transfer of Property Act, 1882. On that basis, interest not yet due on fixed deposits is not to be added as an asset in the wealth computation, and departmental guidance and return forms were consistent with that treatment.

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Issues: Whether interest that had not become due on the valuation date in respect of fixed deposits could be included in the assessee's net wealth as an asset for wealth-tax purposes.

Analysis: Interest on a fixed deposit accrues only when it becomes due under the terms of the deposit. As on the valuation date, the interest for the period after the last credit date had not vested in the assessee and was not enforceable as a present claim. What existed was only a possibility of future receipt or, at best, a mere right to sue, which is not transferable under section 6(e) of the Transfer of Property Act, 1882. Since non-transferable rights that have not vested do not amount to property, they cannot be treated as an asset merely because they may influence the eventual realization of the deposit. The departmental circular and the return form also indicated that interest not yet accrued was not required to be added in such a valuation exercise.

Conclusion: The unaccrued interest on the fixed deposits was not includible in the net wealth of the assessee, and the addition was not sustainable.

Ratio Decidendi: Interest on a fixed deposit becomes an asset for wealth-tax purposes only when it has accrued and become due; a merely future, non-transferable right to receive interest is not property and cannot be included in net wealth on the valuation date.

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