Life interest in residential property may count as belonging to the assessee for wealth-tax exemption

A life interest in a residential property can qualify as property belonging to the assessee for wealth-tax exemption where the interest gives the right to reside in the house and collect rent. The term "assets" under the Wealth-tax Act is broad enough to include a valuable interest short of absolute ownership, and "belonging" is not limited to full legal title. On that reasoning, the value of the assessee's life interest was treated as exempt under section 5(1)(iv) in computing net wealth.

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Issues: Whether the assessee's life interest in a residential property could be treated as property belonging to her so as to qualify for exemption under section 5(1)(iv) of the Wealth-tax Act, 1957.

Analysis: The assessee had only a life interest, while legal title stood in the names of the sons. Even so, the right to reside in the house and to collect rent from the premises constituted a valuable interest in property. The term "assets" under section 2(e) is wide enough to include such interests, and for net wealth the relevant test is whether the asset belongs to the assessee. The expression "belonging" is not confined to absolute ownership and may extend to an interest short of full ownership where the context so requires. On that basis, the life interest was treated as property belonging to the assessee for the purpose of exemption.

Conclusion: The assessee was entitled to exemption under section 5(1)(iv) in respect of the value of the life interest included in her net wealth.

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