Life interest in settled property held includible in net wealth despite later agreement to live apart.

A life interest created in favour of the assessee's wife under a completed settlement deed remained includible in the assessee's net wealth under section 4(1)(a)(i) of the Wealth-tax Act, 1957. The High Court noted that the deed had vested the remainder in another person and had been fully acted upon long before the later agreement to live apart. Because the assessee had no subsisting transferable interest in the agricultural lands on the relevant date, the subsequent agreement could not transform the earlier settlement into a transfer made in connection with living apart. The life interest was therefore treated as a taxable asset in the assessee's net wealth.

---

---

Issues: Whether the value of the life interest created by the assessee in favour of his wife was includible in his net wealth under section 4(1)(a)(i) of the Wealth-tax Act, 1957.

Analysis: The settlement deed created only a life interest in favour of the wife, with vested remainder in another person, and was fully acted upon long before the agreement to live apart. On the relevant date, the assessee had no subsisting interest in the agricultural lands capable of being transferred again directly or indirectly for adequate consideration in connection with the agreement to live apart. Section 4(1)(a)(i) excludes assets transferred to the spouse only where the transfer is made otherwise than for adequate consideration or in connection with an agreement to live apart; on the facts found, the later agreement could not convert the earlier completed settlement into such a transfer. The life interest was therefore a taxable asset falling within the assessee's net wealth.

Conclusion: The value of the life interest was includible in the net wealth of the assessee under section 4(1)(a)(i) of the Wealth-tax Act, 1957, and the question was answered in favour of the Revenue.

---