Balasubrahmanyan, J.:— The assessee in this wealth-tax reference owned a life interest in a number of houses on the relevant valuation date, namely, March 31, 1973. For the assessment year 1973-74, he claimed exemption under s. 5(1)(iv) in respect of one of the houses. The WTO refused the exemption on the ground that the assessee was only a life tenant of the house. The Tribunal, in appeal, however, held that even a mere life interest in the house was entitled to exemption under the Act.
2. In this reference made at the instance of the Revenue, the question of law for our opinion is as under:
“Whether, on the facts and in the circumstances of this case, the assessee is entitled to exemption under section 5(1)(iv) of the Wealth-tax Act in respect of the value of his life interest in Door No. 311, Mint Street Madras, for the assessment year 1973-74?”
3. Before us, Mr. Rangaswamy, learned counsel for the Revenue, put forward the contention that only property in which an assessee has full and absolute ownership can be regarded as “property belonging to him”. Life interest, according to him, does not give to the tenant an absolute and full interest in the property and hence the property held by a life tenant for life cannot be held to be property “belonging to” the assessee within the meaning of s. 5(1)(iv) of the Act. As authority for this proposition the case of A. & F. Harvey Ltd. v. CWT, [1977] 107 ITR 326 (Mad) was cited.
4. The case cited by Mr. Rangaswamy as well as an earlier case in Thirumani Mudaliar v. CWT, [1974] 96 ITR 152 (Mad) had to deal with quite a different question, namely, whether properties included in the estate of a testator can be treated as assets “belonging to” to the executor of the will. Both the cases had to apply the law as it stood before the introduction of s. 19A of the W.T Act.
5. This section enacts that a??? executor shall be “treated” as an individual and the estate of a testato??? shall be assessed in the executor's hands. In both the decisions it w??? held that, in the absence of a provision such as s. 19A, the testator's estate cannot be dealt with as properties “belonging” to the executor. In the earlier decision it was observed (p. 162):
“But, however wide the words, ‘belonging to’ are construed, it is not possible for us to say that the properties in the hands of the executors for administration belong to them. Normally, when we speak of certain physical objects as belonging to a person without any qualifying expression, the primary natural meaning is that they are his own absolute property. When a person by virtue of a contractual obligation takes up the management of the properties as per the directions of a testator, he cannot be said to own the property absolutely.”
6. This passage was quoted as a correct enunciation of the law in the later case. We do not find in these two decisions anything to support Mr. Rangaswamy's argument that a life estate or a life interest in property does not belong to the life estate holder or the life-tenant. The question to be asked is, if it does not belong to him, to whom does it belong during his lifetime? No answer can be given to this rhetorical question which will support Mr. Rangaswamy's argument in this case. Besides, if life interest in property does not belong fully and absolutely to the life-tenant, then it will not be called life interest, nor will the life-tenant be regarded as the owner of the life interest. The Department's argument, if anything, is self-defeating and even counter-productive. What makes for taxable net wealth under s. 2(m) is the aggregate value of all assets “belonging to the assessee”. If the house does not “belong” to the assessee as a life tenant so as to be exempt from s. 5(1)(iv) how can it be included in his assessment as taxable net wealth as a house “belonging” to the assessee? Sometimes arguments are addressed without fully realising where they lead us to.
7. The expression “assets” is defined in the W.T Act as including property of every description, both movable and immovable. It is an axiom of property law that property includes any interest in property. Property, in this sense, may be regarded as a bundle of proprietary interest or rights. Any one of those interests will itself be property, and hence has to be included in the connotation of “assets”. A life interest is a fractional interest in property, falling short of the entire interest in it. It is a well-known species of property under many systems of law, ancient and modern. The idea of a life interest perhaps emerged out of the recognition that property, especially immovable property, tends to outlast the span of human life or lives. We have no doubt whatever that a life interest in house property is an interest in the house. It follows that in a case where the house in question is lived in by the life-tenant, we do not see how exemption can be withheld from him under s. 5(1)(iv). We are satisfied that the Tribunal as well as the AAC were justified in granting the exemption. The question of law is accordingly answered in favour of the assessee and against the Revenue. The Revenue will pay the costs of the assessee. Counsel's fee Rs. 500.