9911796707
TMI Blog1987 (12) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... ch were of her individual ownership to the said trust with a request to accept the same. Along with the said letter, the assessee had also sent transfer forms duly completed by her in respect of the said shares. On 1-3-1979 one of the trustees of the said trust viz. Shri Nalikant Jagabhai received the said shares and issued necessary acknowledgment on the said letter itself. 3. On the aforesaid facts, the assessee filed her gift-tax return on 30-6-1980 showing taxable gift of Rs. 47,744. It may be mentioned the the market value of the shares in question on 22-2-1979 was Rs. 52,744. The GTO allowed statutory exemption of Rs. 5,000 therefrom and worked out the taxable gift of Rs. 47,744. In doing so, the GTO had rejected the assessee's claim for exemption for gift-tax, in the following manner. "The assessee has created a trust for an amount of Rs. 1,000 and has settled the amount with trustees of the trust (Bhavana Nallinikant Trust). Hence the ownership over the corpus of the trust is vested with the trustees and the assessee has no right to possess the corpus and administered it in his own way. As a do any act for investing the corpus. Hence it cannot be said that the donor and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treating the amount of Rs. 52,744 as gift and taxing the same amount under the Gift-tax Act is fully justified and the same is confirmed." 6. Being aggrieved by the order of the AAC, the assessee has come up in appeal with the following grounds : "I AAC erred in upholding the order of the Gift-tax Officer taxing Rs. 52,744 as Gift liable to Gift-tax. II. The AAC ought to have appreciated that the transfer of assets to the Trust where the transferor is the sole beneficiary is sufficient consideration for the transfer. III. The AAC erred in interpretation of section 2(xii) in as much as he has wrongly interpreted the Trust Deed and holding that the Gift-tax Officer is not concerned with the provisions in the Trust Deed. IV. The AAC failed to appreciate that the transfer to trustees is for the benefit of the transferor who is the sole beneficiary." The learned counsel for the assessee reiterated the submissions which were made before the GT authorities and strongly argued that since the donor and the beneficiary wherein and the same person. no gift-tax could be charged on the transfer of shares in question. In this connection, he heavily relied on the decisions of the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said trust, she cannot be treated as 'donee' as defined in section 2(vii) of the Act. The learned counsel for the assessee also gave a background of introduction of Wealth-tax and Gift-tax Acts with a view to impress upon us that in India, we have adopted an integrated scheme of Direct Taxes. Relying on the decisions of the Hon'ble Gujarat High 119 ITR 303, the learned counsel for the assessee Court in the case of CIT v. Rasiklal Balabhai [1979] submitted that in a situation like the one, with which we are facing, we must decide the point at issue's on the plain of common sense' instead of going into long drawn legal debate as to whether the assessee could be charged to gift-tax when she, as a donor had transferred certain shares to her as a beneficiary. Thereafter, the learned counsel for the assessee had also referred to sections 50, 55, 56, 58 and 69 of the India Trusts Act,.1882, which contain 'Trustee may not charge for services' 'Rights to rents and profits', Right to specific executions, Right to transfer beneficial interest' and 'Rights and liabilities of beneficiary's transferee. Finally, the learned counsel for the assessee invited out attention to the following comment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the GT authorities. According to him, since the assessee and the trustees of Bhavana Nalinikant Trust are two separate and distinct entities and since the assessee had gifted the shares in question to the trustees, the GT authorities were fully justified in holding that Rs. 52,744 was exigible to tax. In support of his submission, he relied on the decision of the Hon'ble Gujarat High Court (Full Bench) in the case of CIT v. Smt. Kamalini Khatau (1978) 112 ITR 652. He also submitted that since the shares in question which were originally held by the assessee are now transferred in the name of the trustees in the share registers of the companies whose shares were transferred by the assessee to the trustees, the trustees were the legal owner of the shares in question and not the sole beneficiary as contended on behalf of the assessee. Inviting our attention to the trust deed, he also pointed out that in the event of the death of the assessee, her brother, sister, mother etc. were entitled to receive not only the trust income but also corpus which clearly shows that the assessee was not the sole beneficiary to whom she had transferred the shares in question. As for the expression 'bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to a cash sum of Rs. 1,000 (Rupees one thousand only); AND WHEREAS the Settlor is desirous of settling the said amount for Settlor's own benefit on Settlor's death for Settlor's children, Settlor's brother, Settlor's sister and their children and Settlor's mother in the manner hereafter appearing : AND WHEREAS at the request of the Settlor the Trustees have agreed to act as the First Trustee of these presents as is testified to by their joining in and executing these presents; AND WHEREAS the Settlor has prior to the execution of these presents handed over to the Trustees the said amount; NOW THESE INDENTURE WITNESSED AS FOLLOWS : 1. In consideration of the premises and in order to effectuate the said desire of the Settlor and for diverse other causes and considerations hereunto moving the Settlor DOTH HEREBY ASSIGN unto the Trustees the said amount and the investments for the time being and from time to time representing the same and all other property and assets for the time being subject to the trusts of these presents upon the trusts and subject to the powers and provisions hereinafter declared and contained of and concerning the same; 2. The Trustees shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tees are empowered to accept from any person or persons gifts or any movable or immovable properties and the Trustees shall upon receipt thereof hold the same trusts and subject to the same powers and provisions as are herein contained." 9. On the plain reading of clause (4) of the aforesaid deed, it is quite apparent that the trustees have been empowered to accelerate the date of distribution of the Trust Fund or any part thereof. In such event, sub-clauses (b) of clause (2) shall cease to operate and sub-clauses (c), (d) and (e) of the said clause shall become operative. This would clearly show that the trustees of the trust have a power to eliminate the assessee altogether as a beneficiary 'at any time before the date of distribution. In this view of the matter, we fail to appreciate how the doctrine of self to self could be invoked. It cannot be disputed that the assessee and the trust are two distinct and different persons. Further, it cannot be disputed that the assessee had transferred the shares in question to the trust and not to self. Therefore, in our view, the aforesaid transaction would fall within the provisions of the Act, inasmuch as the definitions of 'donee', 'd ..... 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