Limited power of appointment does not enlarge life interest into corpus ownership for wealth-tax; only life interest is taxable.

A restricted power of appointment among remaindermen did not enlarge the life tenant's interest into ownership of the trust corpus for wealth-tax purposes. The Calcutta HC held that where the trust deed allowed only a limited variation of children's shares and did not permit disposal of the corpus or disinheritance of the ultimate beneficiaries, the life interest remained a limited right of personal enjoyment. It therefore did not create a separate taxable asset in the corpus. Wealth-tax could be levied only on the capitalised value of the life interest, and the questions were answered in favour of the assessee.

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Issues: Whether a limited power of appointment under the will enlarged the assessee's life interest into an interest in the corpus of the trust so as to create a separate asset assessable to wealth-tax, and whether only the capitalised value of the life interest could be brought to tax.

Analysis: The trust deed gave the life tenants only a restricted power to vary the shares of their children among the remaindermen; it did not confer any general power to dispose of the trust corpus or to disinherit the grandchildren, who were the ultimate beneficiaries. Such a personal and limited power did not enlarge the life tenant's proprietary interest in the trust property. A life interest restricted to personal enjoyment cannot be treated as absolute ownership, and the mere existence of a power to appoint among remaindermen does not convert that interest into a distinct taxable asset in the corpus. The assessable wealth, therefore, had to be confined to the value of the life interest.

Conclusion: The limited power of appointment did not constitute an asset within the meaning of wealth-tax law, and the assessee was assessable only on the value of her life interest. The questions were answered in favour of the assessee and against the Revenue.

Ratio Decidendi: A restricted power of appointment among remaindermen does not enlarge a life interest into ownership of the trust corpus or create a separate asset for wealth-tax purposes; only the value of the life interest is taxable.

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