SENGUPTA, J. - (1.) IN this reference made at the instance of the assessee, the following question of law has been referred by the Tribunal to this Court under S. 27(1) of the WT Act, 1957 ('the Act') for the asst. yrs. 1972-73, 1973-74 and 1976-77: "Whether, on the facts and circumstances of the case, the loan of Rs.15,000 raised by the assessee on the security of the life insurance policies, but admittedly invested in the capital of his business and the net value of the assets was taxable, was to be deducted in arriving at the net wealth, of the assessee for the purpose of the WT Act, 1957?"
(2.) SHORTLY stated, the facts are that the assessee who is a contractor holds insurance policies on the security of which he borrowed money from LIC and that debt on the relevant date of valuation corresponding to the asst. yr. 1972-73 was Rs.15,000. The amount of such debt for the other two years was Rs.15,000 and Rs.48,517, respectively. Such borrowed money was lying invested by the assessee in his said business in each of the three relevant accounting years, forming the loan- capital which correspondingly merged with all business assets and debts on the date of valuation. The assessee in his wealth-tax return included the value of all the assets (which are taxable) and also the amounts of debts concerning his said business on the relevant date of valuation for the asst. yr. 1973-74, including the said borrowed money of Rs.15,000 from LIC for arriving at his 'net wealth'. In the assessment made under S. 16(3) of the Act, the WTO disallowed the assessee's claim for deduction of the debt so owed by him to the LIC, holding that it was not allowable because the surrender value of the policies had not been taken into account for the purpose of taxation. Similarly treatment was done in each of the subsequent two years, i.e., asst. yrs. 1973- 74 and 1976-77 as well. On appeal, the AAC reversed such finding of the WTO and allowed the appeal preferred by the assessee. The revenue preferred appeals to the Tribunal against the said orders of the AAC. The Tribunal allowed the Revenue's appeal and restored the order of the WTO holding that such loan taken by the assessee from LIC would not be considered as a debt for the purpose of determining the assessee's net wealth in view of S. 2(m)(ii), r/w S. 5(1)(vi) of the Act.
(3.) THE short question in this case relates to the interpretation of S. 2(m)(ii) which reads as under: "(ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act; " ;