COMMISSIONER OF WEALTH TAX, PUNJAB, J & K, CHANDIGARH, PATIALA versus YUVRAJ AMRINDER SINGH ETC

Citation: [1985] SUPP. 3 S.C.R. 565 · Decided: 08-10-1985 · Supreme Court of India · Bench: V.D. TULZAPURKAR · Disposal: Dismissed

Judgment (excerpt)

COMMISSIONER OF WEALTH IAX, 
PUNJAB, J & K, CHANDIGARH, 
PATIAIA 
v. 
YUVRAJ AMRINDER SINGH ETC, 
OCTOBER 8, 1985 
[V;D. TULZAPURKAR AND SABYASACHI MUKHARJI, JJ,] 
565 
Wealth Tax Act, 1957, ss. 5 (1) (vi) and 2 (e) (iv) - "Any 
policy of insurance" - Interpretation of - Computable annuities 
dependent on human life - Whether exempt from wealth tax. 
Insurance Act, 1938, s. 2 (11) - "Life insurance business" 
- Contract of insurance based on human life - How effected. 
Interpretation of statute - Proviso - Effect of. 
The two assessees are individually assessed to wealth tax 
under the Wealth Tax Act, 1957, They had purchased one annuity 
policy each, and claimed exemption of the value thereof under 
s. 5 (1) (vi) of the Act, alleging that the annuity policies fell 
within the expression "any policy of insurance" occurring in that 
provi,sion. 
The Wealth Tax Officer rejected the claim and included the 
value of the annuity policies in the assessees' net wealth on the 
ground that the exemption was allowable only to insurance policy 
whereas the policy taken out by the assessee was an annuity 
policy whe~eunder the assessee had made lumpsum payment and he 
would be getting periodical returns after the lapse of a number 
of years and as such annuity policy could not be considered as 
insurance policy. 
The 
Appellate 
Assistant 
Colllllissioner 
allowed 
the 
assessees' appeals holding that the annuity policies were covered 
by the term "ar.y policy of insurance" and, therefore, they were 
entitled to exemption under s. 5, (1 ) (vi) • 
This view was confirmed by the Appellate Tribunal in 
appeals 8nd in Reference by the High Court. 
In the appeals by the Revenue to this Court it was 
contended: (1) that a contract for deferred annuity is quite 
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566 
SUFRE.1-.E COURT REPORTS 
(1985] SUPP.3 s.c.R. 
distinct from a "policy of insurance"; an annuity contract is 
operative from the date on which annuity vests and thereafter 
there is no element of insurance in the contract covering the 
risk of human life and, therefore, a contract for deferred 
annuity cannot be treated as a policy of insurance and the value 
thereof would not be exempted under s. 5 (1) (vi) of the Act; (2) 
that the ambit or scope of the expression "any insurance policy" 
occurring in s. 5 (1) (vi) should be confined to the usual life 
policies or 
endo'Wlllent 
policies; 
(3) 
that 
the proviso to 
sub-clause (vi) suggests that the legislature intended to confine 
the expression "any insurance policy" to the exclusion of 
annuities on life and that since non-commutable annuities only 
have been excluded from the definition of 'assets' given in s. 2 
(e), the legislature could not have intended to exempt annuities 
based on human life under s. 5 (1) (vi) by bringing them within 
the expression "any policy of insurance" and (4) that it wuld.be 
incongruous for the legislature to include commutable annuities 
on life within the expression 'assets' under s. 2 (e) on the one 
hand and at the same time to exempt such annuities from the 
charge including them within the expression "any policy of 
insurance" under s. 5 (1) (vi). 
Dismissing the Appeals, 
HELD: 1. Commutable annuities on life, like the ones in the 
instant case, would fall under s.5(l)(vi) of the Wealth Tax Act 
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1957 and the value thereof would qualify for the exemption from 
the charge. [581 D] 
2. The exemption contemplated by s.5(l)(vi) covers interests 
of an assessee in all types of insurance policies and the 
expression" any policy of insurance" in that provision would a 
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fortiori attract within its ambit or scope a deferred annuity 
policy based on human life, it being a species of life insurance 
policies and, therefore, unless there is some warrant to cut down 
the ambit or scope of that expression, the right of intereat of 
an assessee in such a policy would be exempt from the charge of 
wealth tax unless any moneys thereunder have become due and pay-
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able to the assessee on the valuation date. (577 E-G] 
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3. The definition of "life insurance business" as given in 
s.2(11) of Insurance Act, 1938 clearly includes, by a deeming 
provision, the business of granting of annuities upon human life 
within the expression "life insurance business". [575 F] 
4. A contract of insurance based on human life can be 
effected ln two ways, (a) the insurer, in consideration of 
c.w.T. v. YUVRAJ AMRINDER SINGH 
567 
payment of periodical premia, undertakes 

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