Life-interest in trust income not a transferable asset, so capital gains and capital loss could not be computed.

A life-interest in trust income was treated as non-transferable expectancy during the settlor's lifetime, and therefore not a property right capable of transfer under the Transfer of Property Act. After the assessee's wife died, the right to receive 12.5% of the trust income for his own lifetime was personal to him and, even if regarded as property, was an inherited right with no ascertainable original cost of acquisition. Because the asset said to be transferred was not identifiable as the same asset said to have been acquired, neither capital gains nor capital loss could be computed on the transfer. The addition of Rs. 24,500 as capital gains was deleted, and the claim for capital loss was rejected.

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Issues: Whether the sum of Rs. 24,500 could be brought to tax as long-term capital gains on the transfer of the assessee's life-interest/right in the trust income, and whether any capital loss or gain could be computed on such transfer.

Analysis: The assessee's claim proceeded on the footing that he had an asset on 1-1-1954 whose market value could be taken as cost and that he later transferred the same asset to the HUF. The Tribunal held that, so far as the alleged 1-1-1954 asset was concerned, the assessee had only an expectancy during the lifetime of Mansadevi and not a transferable property, the expectancy being excluded from transfer under section 6 of the Transfer of Property Act, 1882. After the death of the assessee's wife, the right to receive 12.5 per cent of the trust income for the assessee's own lifetime was personal to him and, even if regarded as property, it was an inherited right with no original cost of acquisition. The Tribunal further held that the asset allegedly transferred was not the same as the asset said to have been acquired, and that the nature and cost of acquisition could not be identified for computing capital gains or loss.

Conclusion: The addition of Rs. 24,500 as capital gains was deleted, but the claim to a capital loss was rejected.

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