1966 (12) TMI 4

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....e assessee, who is an individual, claimed that although this sum of money was taken ostensibly as a loan, yet, it was really an advance payment out of the right or interest of the assessee in insurance policies " before the moneys covered by the policies became due and payable to the assessee ". Hence, according to the assessee, the amount was exempt from the computation of net wealth as defined by section 2(m) by virtue of section 5(1)(vi) of the Wealth-tax Act, 1957 (hereinafter referred to as the Act). The department relied upon the provisions of section 2(m)(ii) of the Act. Section 2(m) of the Act may be quoted here: " (m) 'net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Ac....

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....olicies and converted into taxable assets, constituted an amount which should be deducted in computing the " net wealth ", the following question was framed by the Tribunal and referred to this court : " Whether, on the facts and circumstances of the case, the loan of Rs. 71,820 raised on the security of life insurance policies, but admittedly utilized in acquiring taxable assets, was to be deducted in arriving at the net wealth of the assessee for purposes of the Wealth-tax Act ? " It is evident, from the question itself, that the assessee, at whose instance the question was framed, treated the advance of Rs. 71,820 as a " loan " raised on the security of the insurance policies. If that is the position, we are unable to see how this ....

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....which will become due and payable by the assessee when the insurance policies mature. The scheme of the Wealth-tax Act is that, when an insurance policy matures, the amount so received will constitute a part of the net wealth of the assessee. If the assessee chooses to capitalise any interest before it actually matures, under an insurance policy and to convert it into assets of a different character, the new assets of a changed character can certainly not continue to enjoy the benefit or exemption conferred by section 5(a)(vi) of the Act. That benefit is confined to assets so long as they retain a character upon which exemption is conferred by the Act. It seems clear to us that the assessee will not be required, when a policy matures, to pa....