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TMI Blog1971 (3) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ad Singh, referred to as the settlor of the first part, and Sri Pateshwari Prasad Singh, Maharani Raj Lakshmi Kumari Devi and Jagdish Kanhia Lal Munshi, referred to as trustees of the other part. Towards the end of the document and before the schedule of properties it was stated as follows : " In witness whereof the parties hereunto set and subscribe their respective hand and seal...." However, the document was ultimately signed by the settlor alone. By this document the assessee purported to settle upon trust certain properties, movable and immovable, including his right and title and interest to receive zamindari compensation bonds of the face value of Rs. 25,00,000. In the preamble of the document it was mentioned that the settlor w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded sum of Rs. 12,50,000 representing the value of the claim in respect of the zamndari compensation bonds to the extent of Rs. 25,00,000 mentioned in the indenture dated 9th of June, 1957. Before the Gift-tax Officer the assessee claimed that in respect of the zamindari abolition bonds no valid trust ever came into existence and as such the value of compensation bonds could not be taken into consideration for determining the total gift made by the assessee during the year in question. The Gift-tax Officer, however, after considering the provisions of the indenture, came to the conclusion that under that instrument the assessee in effect transferred his claim to receive the zamindari abolition and compensation bonds to the extent of Rs. 25, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue was also correct. In second appeal, the Income-tax Appellate Tribunal came to the conclusion that, so far as the claim to receive the zamindari abolition bonds was concerned, the gift in this respect had not been acted upon as even after creating the aforesaid trust, the assessee did not divest himself of the right to obtain those bonds, as evidenced by the fact that he treated them as his own and pledged them with his bankers in his own name and on his personal account as if they belonged to him. Since the gift in regard to the zamindari bonds had not been acted upon, no property was ever conveyed by way of trust to the trustees. Moreover, even subsequently, the assessee did not take any steps to transfer the bonds to the trustees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the interest of the assessee with respect to that claim stood transferred to the trustees. He, therefore, contends that a taxable gift under the Gift-tax Act came into existence. Merely because, subsequently, the assessee, who was one of the trustees, started committing breach of trust, it does not mean that the gift made under the indenture dated 8th of June, 1967, was not valid. Learned counsel, therefore, urged that, in the circumstances, the Tribunal was not justified in excluding the value of the claim to recover compensation as determined by the Gift-tax Officer from the assessee's total taxable gift for the year in question. According to section 2(xii), gift means transfer by one person to another of any existing movable or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trustee) transfers the trust property to the trustee. It is, therefore, clear that in a case where the author of the trust appoints some one else as a trustee, it is necessary that, apart from making a clear declaration about his intention to create a trust, beneficiary and the trust property, he should also transfer the trust property to the trustee before a trust in respect of that property can come into existence. In the case before us, the author of the trust is Maharaja Pateshwari Prasad Singh and the proposed trustees are Pateshwari Prasad Singh, Maharani Raj Lakshmi Kumari Devi and Jagdish Kanhia Lal Munshi. Author of the trust and the trustees are not one and the same person. In the circumstances, before a valid trust in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Considering the recitals made in the document, absence of signature of the trustees made its execution incomplete. This document could, therefore, be used only for showing that sri Pateshwari Prasad Singh made an unequivocal declaration that he wanted to convey unto the proposed trustees his interest to receive zamindari abolition compensation bonds of the face value of Rs. 25,00,000 for the benefit of his wife, but it failed to indicate either that the trustees accepted the obligation or that the property mentioned in it actually stood transferred to the trustees. The question whether in pursuance of the declaration made in this indenture whether the trustees accepted the obligation contained therein and whether the property mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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