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TMI Blog2002 (1) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... aid letter the transfer forms duly completed and signed accompanied by the share certificates were also forwarded to the trustees. It appears that the market value of the shares passed on to the trustees on February 22, 1979, was Rs.52,744. The assessee filed a gift-tax return on June 30, 1980, showing taxable gift at Rs.nil. However, the Gift-tax Officer after allowing statutory exemption of Rs.5,000 worked out the taxable gift at Rs.47,744. The Gift-tax Officer was of the opinion that as the ownership over the corpus of the trust funds vested with the trustees, the assessee's claim that the donor and the donee were the same person was not acceptable. It is pertinent to note that the assessee, who was the settlor of the trust was the sole beneficiary of the trust as per the trust deed. The assessee went in appeal before the Appellate Assistant Commissioner but did not succeed. According to the appellate authority if the assessee's plea that the donor and donee were the same person was accepted, the very purpose of creation of trust would be frustrated and the trust would be invalid. Alternatively, the appellate authority held that though the donor and the beneficiary may be th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e became the legal owner of the assets in question as there was transfer of those assets from the settlor to the trustees. It was further submitted that the right of the beneficiary under the trust is distinct from ownership and this was apparent from the fact that there was a difference between the legal owner and the beneficial owner. That a beneficiary under the trust was only entitled to the beneficial interest and such beneficial interest could be exercised against a trustee as owner of the trust property. Furthermore, it was contended that even in a case like the present one, where the settlor is also the sole beneficiary, the settlor would have no right in the legal ownership of the property. That the provisions of section 3 of the Act fasten a charge of gift and the definition of the term "gift" was distinct from the one given in section 122 of the Transfer of Property Act, 1882. That though under the Transfer of Property Act acceptance was necessary the definition of gift under section 2(xii) of the Act did not require that there should be specific acceptance by a donee. Further contention was raised to the effect that the trust was an obligation annexed to the ownership a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instrument, if any, by which the trust is declared is called the 'instrument of trust"': Trust deed: "2. (b) The trustees shall give the entire income for a period of thirty years to the settlor from the date of execution of these presents or till the death of settlor whichever period expires earlier. (c) On the date of distribution to hold the trust fund and the investments for the time being representing the trust fund upon trust for the settlor and if the settlor is not alive for children of the settlor as may then be living in equal shares. The date of distribution shall arrive at the end of the period of 30 years and in case the settlor of the trust expires earlier than the said period of 30 years, the period of distribution shall arrive on the date of the death of the settlor. (d) On the date of distribution none of the beneficiaries mentioned in clause (c) above are living to hold the trust fund and the investments for the time being representing the trust fund upon trust for brother of the settlor, Hemal Nalinkant, sister of the settlor, Bhargavi Nalinkant, and mother of the settlor, Pramilaben Nalinkant, in equal shares. (e) On the date of distribution if none ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f confidence or in other words it is an obligation arising out of confidence reposed by the settlor-owner of a property in the person to whom the properties are entrusted for the benefit of another. In other words a fiduciary relationship comes into existence between the trustee and the beneficiary. It is an obligation relating exclusively to property. The ownership of trust property has to be for the benefit of a person or more than one person of whom the settlor may himself be one but never for the benefit of an owner alone, viz., the trustee. There cannot be a case where the creator of the trust would also be the trustee and also the sole beneficiary, because in such cases a man cannot enforce a trust against himself. The question therefore that would arise is, can there be a trust where the settlor or creator of the trust and the sole beneficiary under the trust are one and the same person but the trustee or the trustees are distinct from such settlor or the beneficiary. This is the situation in the present case. If the answer is yes, what is the obligation that the trustee is required to discharge or what is the obligation which such a trustee is fastened with. Under the Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istribution is denoted to be the end of the period of 30 years and in case of death of the settlor prior to that date. However, what has weighed mainly with the Tribunal is clause 4 of the deed of trust which provides that the trustees may accelerate the date of distribution before the date of distribution specified, but the Tribunal has fallen into error in reading the latter part of the said clause when it provides that the trust referred to in sub-clause (b) shall forthwith cease, i.e., when the trustees decide to accelerate the date of distribution and the trust contained in sub-clause (c), (d) or (e) as the case may be shall become operative. Therefore, it appears that the Tribunal took into consideration the fact that on acceleration of the date of distribution sub-clause (b) providing for giving the entire income to the settlor would cease and thus the property would not remain with the settlor. It appears that the Tribunal equated income with the property in question and fell into error. In fact, sub-clause (c) specifically states that on the date of distribution the entire trust fund shall pass on to the settlor and only if the settlor is not alive other contingencies ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possessing as owner of the vacant land by the State Bank of India, could be regarded as referable to any land other than that vacant land to be Owned or acquired by it under sub-section (6) of section 34 of the State Bank of India Act for the purpose of providing buildings or other accommodation in which to carry on the business of the State or for providing residences for its officers and other employees. It is equally difficult for us to think that the vacant land held, that is, owned or possessed as owner by any other bank specified in section 19 of the Act is not its owner with all the rights of ownership including the right of disposal vested in it. Therefore, when the bank holds the trust properties in due course of executing and administering the trust for the benefit of beneficiaries, it does not hold such property 'as the owner' or 'possess as owner' envisaged under the Act. In our considered view, no bank holds trust properties as owner envisaged under section 19 of the Act or possess vacant land as envisaged under section 19 of the Act. Thus, a bank even though regarded under Trusts Act as the owner of trust property vacant land for the purpose of 'executing or administ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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