Commissioner of Gift-tax vs K.N. Shanmugasundaram

K.A. Thanikkachalam, J.—At the instance of the Department, the Tribunal referred the following question for the opinion of this court u/s 28(1) of the Gift-tax Act, 1958 (hereinafter referred to as "the Act") :

"Whether, on the facts and in the circumstances of the case, the Tri bunal was right in holding that the assessee is entitled to exemption u/s 5(l)(v) of the Gift-tax Act, 1958, in respect of the initial gift of Rs. 95,000 being the value of the property gifted to Shanmugasundaram Educational Trust ?"

On July 27, 1972, the assessee created a trust deed and registered the same on the same date. In the trust deed, it is stated that the house property at No. 33, Sullivan Garden Road, Madras, valued at Rs. 95,000 was given as a gift to the trust called Shanmugasundaram Educational Trust. The assessee-trust claimed exemption u/s 5(T)(v) of the Act. According to the Department when the gift was made, the trust was not in existence, since the creation of the trust and gifting of the property were on the same date. Therefore, the Gift-tax Officer refused to grant exemption u/s 5(l)(v) of the Act. On appeal, the Appellate Assistant Commissioner agreed with the assessee that the assessee is entitled to exemption u/s 5(l)(v) of the Act, since the gift was made after the trust was created. In order to come to this conclusion, reliance was placed upon the decision in Commissioner of Gift Tax, Bombay City I Vs. Yogendra N. Mafatlal and Another, and Commissioner of Gift-tax Vs. Lachhman Dass Oswal, On further appeal, the Tribunal agreed with the view taken by the Appellate Assistant Commissioner.

Before us, learned standing counsel appearing for the Department submitted that inasmuch as the registration of the trust deed and the dedication of the property to the trust was made on the same date, the assessee is not entitled to exemption u/s 5(l)(v) of the Act. On a reading of the trust deed, it was pointed out that the trust was created earlier and in the same trust deed the said property was dedicated to the said trust. Therefore, gift was made after the trust was created. There is also a decision of this court in Commissioner of Gift-tax Vs. Yateshwari Saradapriya, , wherein this court held that where under a single deed when the trust was created and in the same deed the property was dedicated to the said trust, the trust is entitled to exemption u/s 5(l)(v) of the Act. As against the decision in Commissioner of Gift-tax Vs. Yateshwari Saradapriya, SLP filed was rejected in [1991] 187 ITR 70. Thus, considering the facts arising in this case, in the light of the decisions cited supra, we answer the question referred to us in the affirmative and against the Department. No costs.