DR (MRS ) G ISSAC Vs. WEALTH-TAX OFFICER

JUDGEMENT

(1.) These appeals raise an interesting question about the impact of the Wealth-tax Act, 1957 (the Act) on interest arising from bank accounts.

(2.) The assessee is an individual. she is qualified physician. She had been to Dubai to make her fortune. On 20-10-1973, she returned to India. For the assessment years 1981-82 and 1982-83, for which we are concerned, she is treated as resident for tax purposes. She had fixed deposits with the British Bank of Middle East, Bombay, and State Bank of India, Kodaikanal. The amount in the British Bank of Middle East was Rs. 20,48,005 and the amount in the State Bank of India was Rs. 70,000. Under the terms of the deposit with the British Bank of Middle East, interest was payable on 30th June and 31st December of each year and with the State Bank of India every month. Since the assessees valuation date was 31st March, the assessee had taken into account only the interest credited on 31st December in the British Bank of Middle East account, and on 1st March in the State Bank of India account. The WTO was of the view that even the interest accrued after dates if credit until 31st March in each year was to be added to the net wealth of the assessee as if it had accrued. He, accordingly, added a sum of Rs. 52,950 for the assessment year 1981-82 made up of Rs. 51,200 for the British Bank of Middle East and Rs. 1,750 for the State Bank of India. For the next assessment year 1982-83, he added a like amount. On appeal, the Commissioner (Appeals) was of the opinion that even though the assessee could not enforce the payment of the interest before the due date, the interest accrued uptill 31st March would become part of the asset and enhance market value of the fixed deposits and as such this enhancement, according to the commissioner, was equivalent to the interest accrued and, therefore, justified the addition.

(3.) In further appeal, before us, the contention of the assessee is that interest does not accrue until the due date and, therefore, there is no asset in existence with regard to interest after the due date which could be added as part of the net wealth of the assessee. On the other hand, the contention of the revenue is that interest accrues day-to-day and enhances the value of fixed deposits and, therefore, the market value of the fixed deposits as on the valuation date should include the interest accrued. It is also submitted that the method of accounting of the assessee is irrelevant in considering the assessability for wealth-tax purposes.