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Issues Involved:
1. Whether the gift during the previous year relevant to the year under reference was only for a cosmopolitan charity. 2. Whether no gift in favor of the grandchildren existed during the year under reference. 3. Whether the exemption provision under s. 5(1)(v) of the Act was not attracted. 4. Whether the gift in question did not qualify for exemption under s. 5(1)(v) being an initial gift. Detailed Analysis: Issue 1: Cosmopolitan Charity The court examined whether the gift made by the assessee during the relevant year was solely for cosmopolitan charitable purposes. The trust deed specified that the net income of the trust fund was to be used for charitable purposes until March 10, 1973, or the death of the settlor's surviving grandchild, whichever was earlier. The court noted that these charitable purposes were covered under s. 15B of the Indian I.T. Act, 1922, and now under s. 80G of the I.T. Act, 1961. The Tribunal had previously held that the gift constituted by the creation of the trust was entitled to exemption under s. 5(1)(v) of the said Act. The court agreed with this conclusion, affirming that the gift during the relevant year was indeed for charitable purposes. Issue 2: Gift in Favor of Grandchildren The court considered whether any gift in favor of the grandchildren existed during the relevant year. The trust deed stipulated that from March 10, 1973, to March 10, 1978, the net income of the trust was to be used for the benefit of the settlor's grandchildren, and the trust fund was to be handed over to them in equal shares on March 10, 1978. However, during the relevant year, the grandchildren had no vested interest in the trust fund. The court referenced the Division Bench decision in CGT v. G. G. Morarji, which held that contingent interests do not count as vested interests. Thus, the court concluded that no gift in favor of the grandchildren existed during the relevant year. Issue 3: Exemption Provision under s. 5(1)(v) The court evaluated whether the exemption provision under s. 5(1)(v) of the Act was applicable. This section exempts gifts made to institutions or funds established for charitable purposes. The court reiterated that the income of the trust fund was to be used solely for charitable purposes during the relevant year, and thus, the gift was entitled to exemption under s. 5(1)(v). The court rejected the department's contention that the gift must involve the entire corpus of the trust fund to qualify for exemption, affirming that the exemption was applicable. Issue 4: Initial Gift Qualification The court addressed whether the gift in question did not qualify for exemption under s. 5(1)(v) because it was an initial gift. The court referenced the Division Bench decision in CGT v. Yogendra N. Mafatlal, which held that initial gifts made for starting or constituting a fund for charitable purposes are entitled to exemption in the same manner as subsequent gifts to the fund. Based on this precedent, the court concluded that the initial gift by the assessee was entitled to exemption under s. 5(1)(v). Conclusion: The court answered all the questions in favor of the assessee: - Question (1): In the affirmative. - Question (2): In the affirmative. - Question (3): In the negative. - Question (4): In the negative. The Commissioner was ordered to pay the costs of the reference to the assessee.
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