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TMI Blog1989 (1) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... to the life interest of the assessee added by the Income-tax Officer in accordance with rule 1B of the Wealth-tax Rules, 1957 ? 2. The assessee is Prince Muffakkam Jah Bahadur, a member of the H.E.H. the Nizam's famijy. The question arose with reference to the assessment years 1969-70 to 1975-76. The late Nizam established several trusts for the benefit of his heirs, relations and others. One of the trusts so created is H.E.H. the Nizam's Prince Mukaram Jah, Prince Muffakkam Jah and Princess Dur-Re-Shewar Trust. In pursuance of the directions given in the trust deed the trustees constructed a house on the land belonging to Chamilijah at a cost of ₹ 6 lakhs. The assessee was entitled to live in the said house during his lif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar commencing on the 1st day of April, 1970, or any subsequent assessment year- (i)animals; (ii)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; (iii)any interest in property where the interest is available to an assessee for a period not exceeding six years from the date the interest vests in the assessee : The expression 'net wealth' is defined in clause (m) in the following words: (m) 'net wealth' means the amount by which the aggregate value computed in accordance with the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes property of every description, movable or immovable, but does not include those specifically mentioned in the said definition. According to section 7, the value of any asset shall be estimated to be the price which in the opinion of the Assessing Officer it would fetch if sold in the open market on the valuation date. This determination shall of course be made in accordance with the Wealth-tax Rules, 1957 ('the Rules') made in this behalf. Rule IB of the Rules provides the mode of determining the value of life interest. Rule IB reads thug : 1B. Valuation of life interest.-(1) For the purposes of sub-section (1) of section 7, the market value of the life interest of an assessee shall be arrived at by multiplying the avera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the life interest so determined shall, in no case, exceed the market value as on the valuation date of the corpus of the trust from which the life interest is derived. The Tribunal was of the opinion that rule 1B is not workable in the present case and cannot, therefore, be applied. The Tribunal further held that where income does not actually come from a definite source or where the assessee does not have the right to receive income from a definite source, it cannot be said that he derives income. The Tribunal also held that if a person is entitled to stay in a house free of rent, it cannot be said that he is deriving income thereby ; may be he is saving expenditure, but it does not amount to deriving income within the meaning of rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is also not permissible for him to sub-lease the said house or lease out a part of it. Thus, we agree with the Tribunal that rule 1B cannot be applied for determining the value of the said Interest. This, of course, does not mean that an asset should be excluded altogether from computation. Even if the said rule does not apply, an asset must still be valued and must be included in the wealth of the assessee if it satisfies section 7(1). The question then is whether it is an 'asset' within the meaning of section 7(1), and as defined in clause (e) of section 2, We have already referred to the fact that the assessee has no right to dispose of the said interest in any manner. His only right is to live in the house and nothing more. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed to wear the jewels. She has no proprietary interest of any sort in the jewels. For instance, she cannot pledge the jewels ; she cannot lend the jewels to a friend or relative to be worn on occasions. The trustees are further given the right to withdraw the jewels from her any time they like and sell them. No doubt, the income from the sale proceeds will have to be paid to the Shahebzadi but the Shahebzadi herself has no voice on the question whether the jewels may or may not be sold. Her interest in the jewels is limited to being allowed to wear them if the trustees do not withdraw them from her. To our minds, the interest appears to be of a permissive nature and cannot be called property, however, widely the expression may be inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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