JUDGMENT
1. The Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under Section 27(1) of the Wealth-tax Act, 1957, hereinafter referred to as "the Act", for opinion to this Court :
Whether, in law and on facts of the case the Income-tax Appellate Tribunal was justified in excluding the amount deposited under C.D.S. from the net wealth of the assessee ?
2. The present reference relates to the assessment year 1978-79.
3. Briefly stated the facts giving rise to the present reference are as follows :
4. The respondent-assessee is an individual. He has been assessed to wealth-tax for the assessment year in question. He had filed his return of wealth declaring the net wealth at Rs. 19,07,100. During the course of the assessment proceeding the only point in dispute raised before the assessing authority was regarding valuation of jewellery. The assessing authority has estimated the value of jewellery at Rs. 2,50,000 as was done by him in the previous assessment year 1977-78. Feeling aggrieved the respondent-assessee preferred an appeal before the Commissioner of Wealth-tax (Appeals), Central (1), Bombay, who partly allowed the appeal and directed the assessing authority to value the jewellery at Rs. 1,80,000 instead of Rs. 2,50,000. Still feeling aggrieved the respondent-assessee filed further appeal before the Tribunal. Before the Tribunal apart from raising the question about valuation of jewellery, the respondent-assessee also raised an additional ground that the amount standing to the credit in the compulsory deposit scheme is to be excluded from the taxable wealth under Section 2(e)(2)(ii) of the Act. The Tribunal following the decision of the Delhi Bench of the Tribunal in the case of S.D. Nargolwala [1983] 5 ITD 690, allowed the respondent-assessee to raise this ground and held that the same be exempted from inclusion in the net wealth of the respondent-assessee and accordingly directed that the value of the compulsory deposit shall be excluded from the respondent-assessee's net wealth.
5. We have heard Sri R.K. Upadhyaya, learned standing counsel for the Revenue, and Sri R.S. Agrawal, learned counsel for the respondent-assessee.
6. Learned standing counsel for the Revenue submitted that the amount standing to the credit of the respondent-assessee in the compulsory deposit scheme is not an exempted item and, therefore, it could not have been excluded from the net wealth and at best it ought to have been included while granting exemption of the deposits in a banking company for the maximum prescribed limit of Rs. 1.5 lakhs which exemption has been allowed in full by the assessing authority.
7. Sri R.S. Agrawal, learned counsel for the respondent-assessee, however, submitted that the respondent-assessee was required to deposit the amount in the compulsory deposit scheme in accordance with the statutory enactment. As it was not out of free volition therefore, it cannot be treated as an asset. In any event, it was liable to be granted exemption.
8. Having heard learned counsel for the parties, we find that under Section 2(e)(2)(ii) of the Act as it stood during the relevant period a right to any annuity (not being an annuity purchased by the assessee or purchased by any other person in pursuance of a contract with the assessee) in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant is excluded from the word "assets".
9. The amount deposited in the compulsory deposit scheme was repayable in five equal instalments after the expiry period. The annuity has been purchased by the respondent-assessee, therefore, it is not excluded from the term "assets" as defined under Section 2(e)(2)(ii) of the Act. This Court in W.T.R. No. 121 of 1987, S.N. Agarwal v. CWT, decided on December 22, 2004, has held that the amount standing to the credit of the assessee under the compulsory deposit scheme cannot be treated as an annuity under Section 2(e)(2)(ii) of the Act. Further by the Finance (No. 2) Act of 1980, Section 7A was inserted in the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974, with effect from April 1, 1975, which provided that for grant of exemption under Section 5 of the Act, the amount of compulsory deposit shall be deemed to be a deposit with a banking company to which the Banking Regulation Act, 1949, applies. Thus, a deposit made under the compulsory deposit scheme is to be treated at par with the deposits with the banks and is liable to exemption under Section 5(1A) of the Act subject to the limit specified therein. The submission that the amount standing to the credit in the compulsory deposit scheme is not an "asset" is devoid of any substance. Whether the amount is deposited, under any statutory enactment or not, normally it remains in the ownership and belongs to the assessee and, therefore, it is an "asset" which having not been excluded for granting exemption under Section 5 of the Act, is liable to be included in the net wealth subject to exemption granted under Section 5(1A) of the Act. As in the present case exemption under Section 5(1A) of the Act to the maximum limit of Rs. 1,50,000 has already been allowed, the question of granting any further exemption does not arise.
10. We accordingly answer the question referred to us in the negative, i.e., in favour of the Revenue and against the assessee.