Self-created annuity rights under the Wealth-tax Act do not escape inclusion in net wealth when the statutory exclusion is unavailable.

Deposits made by assessees under the Compulsory Deposit Scheme, 1974 were treated as includible assets in net wealth under the Wealth-tax Act, 1957. The statutory exclusion for a right to an annuity applied only where the annuity was not purchased by the assessee or another person under a contract with the assessee and where commutation into a lump sum was barred. Because the deposits were self-created by the assessees, they did not fall within that exclusion even if the payments were periodic and fixed. The earlier version of section 2(e)(1)(iv) was held inapplicable to the relevant assessment years.

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Issues: Whether deposits made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 constituted assets includible in net wealth under the Wealth-tax Act, 1957, or were excluded as annuity-related rights.

Analysis: The relevant definition of "assets" in section 2(e) of the Wealth-tax Act, 1957, as applicable from the assessment year commencing on 1 April 1970, excludes only a right to an annuity that is not purchased by the assessee or by any other person in pursuance of a contract with the assessee and where commutation into a lump sum is precluded. The deposits in question were made by the assessees themselves under the Compulsory Deposit Scheme, 1974. Even assuming the payments were in the nature of an annuity, they were self-created deposits and therefore fell outside the statutory exclusion. The earlier clause in section 2(e)(1)(iv) did not govern the relevant assessment years.

Conclusion: The deposits were includible in the assessees' net wealth and were not excluded under section 2(e)(2)(ii) of the Wealth-tax Act, 1957.

Ratio Decidendi: For assessment years governed by section 2(e)(2)(ii) of the Wealth-tax Act, 1957, a self-purchased or self-created annuity right does not fall within the exclusion from "assets" even if the payment structure is periodic and fixed.

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