1B. [ Valuation of life interest [Substituted by G.S.R. 1190, dated 28th July, 1966.]
(1)For purposes of sub-section (1) of Section 7, the market value of the life interest of an assessee shall be arrived at by multiplying the average annual income that accrued to the assessee from the life interest by I/p+d-1 where 'P' represents the annual premium for a whole life insurance without profits on the life of the life tenant for unit sum assured as specified in the appendix to these rules and 'd' is equal to i/1+i'i' being the rate of interest.Explanation.-For the purposes of this rule(a)"life tenant" means a person for the duration of whose life the life interest is to subsist;(b)"average annual income" means the average of the annual gross income derived by the assessee from the life interest up to the period ending on the valuation date reduced (in each case) by the average of the expenses incurred on the collection of such income in those years:Provided that the amount to be reduced shall, in no case, exceed five per cent, of the average of the annual gross income:Provided further that in case the income so derived is for a period exceeding three years, only that income derived during the three years ending on the valuation date shall be taken into account;(c)the rate of interest shall be 61/2 per cent per annum.(2)Notwithstanding anything contained in sub-rule (1),(a)the Wealth-tax Officer may, if he is of the opinion that in the case of the life tenant a life insurance company would not take the risk of insuring his life at the normal premium rates in force but would demand a higher premium, vary the valuation suitably;(b)the value of the life interest so determined shall, in no case, exceed the market value as on the valuation date of the corpus of the trust from which the life interest is derived.]
