G. K. MISRA C.J. - Four questions have been referred by the Tribunal for the opinion of this court under section 27(1) of the Wealth-tax Act, 1957.
They are :
'(1) Whether the provisions of the Wealth-tax Act levying tax on the total wealth of Hindu undivided families are ultra vices the Constitution of India
(2) Whether such provisions are ultra vires the Constitution of India as being discriminatory ?
(3) Whether the provisions of the Wealth-tax Act imposing a tax on the capital value of the lands and buildings are ultra vires the Constitution ?
(4) Whether, in the facts and circumstances of the case, the life insurance premia of Rs. 8,481 and interest thereon of Rs. 85 paid by cheque on the assessees overdraft account with the State bank of India was allowable as a debt under section 2(m) of the Wealth-tax Act ?' Mr. P. V. B. Rao for the petitioner does not press the first three questions. It is, therefore, not necessary to give answers on these questions.
The facts relevant to the fourth question may be stated in brief. The assessee is the karta of a Hindu undivided family. He has been assessed to wealth-tax for the year 1961-62. The assessee drew money from an over-draft account with a bank to pay premia on a life insurance policy and wanted deduction of the said amount for the purpose of computation of net assets. The assessees stand was rejected all through.
The question for consideration is whether the amount so claimed can be deducted from the net wealth.
Section 2(m)(ii) of the Wealth-tax Act runs thus :
'(m) net wealth means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than -..........
(ii) debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth-tax is not payable under this Act.'
The contention is that the amounts paid towards premia were debts in relation to the life insurance policy which is an asset in respect of which wealth-tax is not payable under the Act. Under section 5(1)(vi) of the Wealth-tax Act :
'Wealth-tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee -.............
(vi) the right or interest of the assessee in any policy of insurance before the moneys covered by the policies become due and payable to the assessee.'
Recurring payment of premia towards a life insurance policy involves expenditure. Thus a liability or debt is incurred. This debt is incurred in relation to a life insurance policy which under section 5(1)(vi) is an asset not to be taken into consideration for computation of net wealth until of matures. By virtue of section 2(m)(ii), the payment of premia, though a debt, is not to be excluded from the computation of net wealth. The Tribunal took the correct view. We would answer the fourth question in the negative.
The reference is accordingly answered, but, in the circumstances, there will be no order as to costs.
R. N. MISRA J. - I agree.