1. These appeals by the assessee are consolidated and disposed of by a common order for the sake of convenience as they involve common issue and arise from the consolidated order of the AAC. The assessee is an individual and the appeals relate to the assessment years 1974-75 to 1978-79 for which the last dates of the respective financial years are the valuation dates. The AAC sustained the order of the WTO rejecting the claim of the assessee for exemption under Section 5(1)(iv) of the Wealth-tax Act, 1957 ('the Act'). Therefore, the common issue involved in these appeals is whether the assessee is entitled to exemption under Section 5(1)(iv) or not.
2. The assessee's husband, late Shri Gopala Pillai, executed a will on 25-5-1972 bequeathing a property of 10 cents of land and two storeyed building thereon to his three sons with life-interest to the assessee.
In the will it was specified that the ownership of the property has to be changed, in the names of three sons after the death of the testator.
The value of life-interest was sought to be assessed and, accordingly, the WTO included the life-interest in the net wealth of the assessee.
The assessee claimed exemption under Section 5(1)(iv) in respect of the property on the ground that she is the owner of the property to the extent of life interest therein. The WTO rejected the claim on the ground that the property is owned by the sons of the assessee and the appellant has got only the life interest and, therefore, she was not entitled to exemption under Section 5(1)(iv).
3. On appeal, the AAC observed that life-interest in the property was different from the property itself which was owned by three sons of the assessee. Further, he observed that: exemption under Section 5(1)(iv) was available only in respect of a house or part of a house belonging to the assessee and in the present case life-interest of the assessee could not be termed as house or part of a house. Consequently, he held that the assessee was not entitled to exemption under Section 5(1)(iv) . Consequently, he sustained the order of the WTO on this point. Hence, the appeal by the assessee to the Tribunal.
4. The common ground taken by the assessee in these appeals is that on the facts and in the circumstances of the case the WTO as well as the AAC have gone wrong in disallowing the assessee's claim under Section 5(1)(iv.) The contention on behalf of the assessee was that the assessee is the owner of the property to the extent of lire-interest in the property and in support of this contention he relied on the decision of the Madras High Court in the case of S. Naganathan v. CWT  101 ITR 287 and the decision of the Karnataka High Court in the case of CWT v. K.M. Eapen  114 ITR 415. In the case of S.Naganathan (supra) the Madras High Court held that the benefit of Section 5(1)(iv) would be available also where the property transferred by an assessee to his wife was included in the wealth-tax assessment of the husband by reason of Section 4(1)(a) of the Act. Similarly the Karnataka High Court has held that where the value of a house transferred by a husband to his wife was to be included in the net wealth of the husband by fiction created under Section 4(1)(a), it has to be assumed even for the purpose of Section 5(1)(iv) that the house belonged to the husband and that the exemption up to Rs. 1 lakh had to be allowed in the hands of the husband. The contention of the assessee was that she had the right of ownership, namely, right to and enjoyment of services or benefits flowing from the asset usually evidenced by the possession of the legal title or by a beneficial interest in the title.
5. We have duly considered the rival contentions and the facts of the case. At the outset we have to observe that the ownership of the property was to be changed in the names of the three sons after the death of Shri Gopala Pillai and this was done as a matter of fact before the valuation dates. Nonetheless the assessee is enjoying the life interest in the property inclusive of the right of residence in the property and the right to collect the rentals from shops located in the premise which are valuable rights similar to those of legal owners.
These legal owners have no right to collect the rent of the property till the lifetime of the assessee. In this connection it is to be considered whether life-interest is an asset in terms of Section 2(e) of the Act. According to Section 2(e), " 'assets' includes property of every description, movable or immovable, but does not include the exempted items". The exempted items include any interest in property where the interest is available to the assessee for a period not exceeding six years from the date the interest vests in the assessee.
The assessee has been alive and has been enjoying the life-interest so long and, therefore, it is clear that the life-interest of the assessee does not fall within the exempted items of Section 2(e). Section 2(e) equates assets with property which is left undefined in the Wealth-tax Act as well as in the Transfer of Property Act, 1882. In the case of J.K. Trust v. CIT  32 ITR 535, the Supreme Court observed that the word 'property' is a term of the widest import and subject to any limitation or qualification which the context might require, it signifies every possible interest which a person can acquire hold and enjoy. Therefore, the rights relating to an interest in movable or immovable property are to be taken as assets. In the case of Ahmed G.H.Ariff v. CWT  76 ITR 471 (SC) it has been held that the right to receive a specified net rent, from wakf estate was property, the capital value of which was includible in the wealth.
6. Section 2(m) defines net wealth as the amount by which the aggregate value computed in accordance with the Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in the net wealth which, is in excess of the aggregate value of the debts owed by the assessee on the valuation date other than certain debts which are specifically exempted.
Therefore, for the purpose of net wealth, the criterion is that the assets should belong to the assessee and not owned by the assessee.
Under Section 7(1) of the Act dealing with valuation of assets subject to rules, the value of asset, other than cash, shall be estimated to be the price which, in the opinion of the WTO, it would fetch if sold in the open market on the valuation date. It is in accordance with Section 7 read with the Wealth-tax Rules, 1957 the WTO treated the life-interest of the assessee as asset or property belonging to the assessee and included the same as part of net wealth for these years under consideration. The Calcutta High Court had occasion to consider the meaning and purport of the word 'belonging' occurring in Section 33(1)(n) of the Estate Duty Act, 1953 ('the 1953 Act'). In the case of CED v. Jyotirmoy Raha  112 ITR 969 it has been held by the Calcutta High Court that the word 'belonging' though capable of denoting an absolute title yet it was not confine to that sense. It further held that even possession of an interest less than that of full ownership could be signified by that word and, accordingly, granted exemption. The Andhra Pradesh High Court has also held likewise in the case of CED v. Estate of Late Sanka Simhachalam  99 ITR 370. In that case, the deceased had executed a settlement retaining life-interest in the residential house and conveyed the vested remainder to his son, the accountable person. The Madras High Court held that the words 'belonging to' in Section 33(1) though, no doubt, denote absoulte ownership, signify even possession of an interest less than that of full ownership if the context so requires. It pointed out that under Section 2(15) of the 1953 Act any interest in the property itself is property. Thus, reading Section 33(1)(n) with Section 2(75) the word 'property' includes not only the properties wherein the deceased possessed absolute ownership in the corpus of any property but also any interest in the property. Therefore, exemption under Section 33(1)(n) was granted. Applying the same ratio to the assessee's case, we hold that despite the fact that the three sons of the assessee are the legal owners of the property, the property could be said to belong to the assessee for the purpose of exemption under Section 5(1)(iv).
Although transfer of property does not define property and exempts an interest in property restricted in its enjoyment to the owner personally but nonetheless the right of life-tenant especially right to collect the rent and enjoyment thereof is transferable or assignable as a matter of fact in the commercial world to others or to the sons by way of acceleration. Therefore, it cannot be said that exception contained in Clause (d) of Section 6 of the Transfer of Property Act applies to the case of the assessee and, therefore, the assessee is not entitled to claim exemption under Section 5(1)(iv) of the 1957 Act. In this view of the matter, therefore, we hold that the assessee is entitled to exemption in respect of claim under Section 5(1)(iv) to the extent of value of life-interest included in the net wealth of the assessee. Therefore, we set aside the orders of the authorities as they are not valid in law and accept the ground taken by the assessee.
1. While agreeing with the conclusion of the Accountant Member that the assessee is entitled to exemption under Section 5(1)(iv), I may add that our conclusion is supported by the view expressed by the Madras High Court recently in CWT v. K. Ramachandra Chettiar  141 ITR 771. In that case the claim of the assessee, who owned a life-interest in a number of houses, for exemption under Section 5(1)(iv) in respect of one of the houses was upheld by the Tribunal and the High Court held that the assessee was entitled to the relief under Section 5(1)(iv) pointing out that the life-interest is a fractional interest in property falling short of the entire interest in it and in a case where the house in question is lived in by the tenant, exemption cannot be withheld from him under Section 5(1)(iv). The ratio of this decision squarely applies to the facts of the present case. The claim of the assessee under Section 5(1)(iv) is, therefore, allowed for all the assessment years.