Wealth-tax deductibility of insurance premium debt denied where liability related to an exempt life insurance policy.

Premiums paid on a life insurance policy funded through an overdraft were not deductible as a debt in computing net wealth under the Wealth-tax Act, 1957. The assessee's interest in the policy was excluded from net wealth under section 5(1)(vi) until policy moneys became due and payable, and section 2(m)(ii) disallowed debts secured on, or incurred in relation to, an asset on which wealth-tax was not payable. Because the premium liability arose in relation to an exempt insurance policy, it could not be treated as an allowable debt. The referred question was answered in the negative.

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Issues: Whether premiums paid on a life insurance policy, funded through an overdraft, constituted a deductible debt in computing net wealth under the Wealth-tax Act, 1957.

Analysis: The amount claimed as deduction arose from recurring premium payments on a life insurance policy. Under section 5(1)(vi) of the Wealth-tax Act, 1957, the assessee's right or interest in such a policy is excluded from net wealth until the policy moneys become due and payable. Section 2(m)(ii) of the Wealth-tax Act, 1957 excludes debts which are secured on, or incurred in relation to, an asset in respect of which wealth-tax is not payable. Since the premium liability was incurred in relation to an exempt insurance policy, it could not be deducted in computing net wealth.

Conclusion: The claimed amount was not allowable as a debt under section 2(m)(ii) of the Wealth-tax Act, 1957, and the answer to the referred question was in the negative.

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