1985 (8) TMI 48

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....ssee was entitled to a deduction of Rs. 1,69,950 representing the loan taken from the Life Insurance Corporation of India on insurance policies in view of the provisions of section 2(m)(ii) of the Wealth-tax Act, 1957 ? " In order to appreciate the question of law referred to us, it is necessary to notice the facts of the case in the first instance. The assessee is a Hindu undivided family (" HUF "). For the assessment year 1974-75, relevant to the valuation date March 31, 1974, the assessee filed his return under the Act before the Wealth-tax Officer, Mercara (" WTO "), inter alia, claiming a sum of Rs. 1,69,950 " as a debt owed by him " being the amount borrowed from the Life Insurance Corporation of India on a life insurance policy....

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....rging section provides for levy of wealthtax in respect of the " net wealth " of an assessee on the corresponding valuation date. The definitions found in section 2 and all other provisions of the Act should be so read as to carry out the purposes of the Act and in particular section 3 which is the charging section of the Act. Section 2(m) of the Act only defines the term " net wealth " for purposes of the Act. Under this very definition, the term " net wealth " means the amount by which the aggregate value is computed in accordance with the provisions of the Act of all the assets, wherever located, on the valuation date. The computation of " net wealth " has, therefore, necessarily to be made as stipulated in the other provisions of the....

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....the net wealth of an assessee. When once an insurance policy which had not matured is not included in the net wealth, it also follows that any loan taken on the same will not be a " debt owed in computing the net wealth of an assessee. The amendments made to section 2(m) of the Act by the Wealth-tax (Amendment) Act, 1964 on which also reliance was placed by Sri Sarangan as pointed out by the High Courts of Madras and Gujarat respectively in Srinivasan's case [1980] 123 ITR 464 and Apoorva Shantilal's case [1982] 135 ITR 182, with which we are in respectful agreement, had not really made any changes either in the scheme of the Act or in the determination of net wealth. We see no merit in this contention. In the cases noticed by us earl....