TMI Blog2001 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... pus on the ground that it was only the' assessee's interest in the property which was transferred and it was that which was required to be considered for the purpose of the gift-tax?" - we answer questions Nos. (1) and (2) in the affirmative, i.e., in favour of the Revenue and against the assessee, while question No. (3) is answered in the negative, i.e., in favour of the Revenue and against the assessee. So far as question No. (4) is concerned, we answer the same in the affirmative, i.e., in favour of the assessee and against the Revenue. - - - - - Dated:- 4-9-2001 - Judge(s) : M. S. SHAH., D. A. MEHTA. JUDGMENT The judgment of the court was delivered by M.S. SHAH J.-At the instance of the assessee as well at the instance of the Revenue, the following questions of law are referred to us for our decision in respect of the assessment year 1976-77: At the instance of the assessee: "(1) Whether, on the facts and in the circumstances of the case, exercise of power of appointment by the assessee was a transfer of the assessee's interest in the property under section 2(xxiv)(c) of the Gift-tax Act making the assessee liable to tax under the Gift-tax Act? (2) If the answer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amongst Gira, Geeta, Vikram and the settlor's daughter Anarkali or the survivors or survivor of them". Bhartidevi Sarabhai (settlor) settled the shares and investment as specified in the schedule being ten shares in Karamchand Premchand Private Limited, 25 shares in Sarabhai Merck Private Limited and two shares in Cotton and Cloth Private Limited (ordinary shares), which were then valued at Rs. 78,000. The trustees for the purpose and subject to the powers provided in the deed of settlement were given the discretion either to accumulate or pay the net income of the trust funds or any part or parts thereof at any time or times amongst the persons hereinafter referred to or to any one or more of them. Different beneficiaries were specified for different period in clause (i). For the period from and after January 1, 1967 to March 24, 1978, the beneficiaries were to be the settlor's sister Gira and Gita and the settlor's daughter Anarkali. After March 25, 1978, the beneficiaries were to be Gira and Gita, Anarkali and the settlor's brother Vikram. Clause (b) reads as under: "(b) From and after 1st January, 1967 amongst Gira, Geeta, Vikram and settlor's daughter Anarkali or the surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "(xxiv) 'transfer of property' means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes- (a) the creation of a trust in property; (b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property; (c) the exercise of a power of appointment of property vested in any person, not the owner of the property, to determine its disposition in favour of any person other than the donee of the power; and (d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person;" Since the argument also turned on the subsequent amendment to the said definition the amended definition which came into force with effect from April 1, 1980, is also set out hereunder: "(c) the exercise of a power of appointment (whether general, special or subject to any restrictions as to the persons in whose favour the appointment may be made) of property vested in any person, not the owner of the property, to dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vered the general power of appointment. The resolution dated January 24, 1976, passed by the trustees also conferred such general power of appointment on Anarkali and, therefore, even applying the test laid down by the Bombay High Court in CGT v. Mrs. Jer Mavis Lubimoff [1978] 114 ITR 90 the case fell within the definition of transfer of property. Having heard learned counsel for the parties, we are of the view that the Tribunal was right in holding that the provision of section 2(xxiv) even prior to its amendment, referred to the exercise of the power of appointment and the words "in favour of any person other than donee of the power" qualifies the words "exercise of power" and not the words "power of appointment" to determine its disposition. In CGT v. Mrs. Jer Mavis Lubimoff [1978] 114 ITR 90, the Bombay High Court examined the concept of "power of appointment" and observed as under: "The expression 'power of appointment' has not been defined in the Act, but what that expression means is very clear if regard be had to the provisions in the statutes. The Explanation to section 69 of the Succession Act, 1925, provides that where a man is invested with power to determine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appointment in that case could not be exercised in favour of the donee, that it was a special power of appointment and therefore the power could not have been exercised in favour of anybody (other than the donee of the power) but it was confined only to a specified class and therefore not being general power of appointment it fell outside the scope of section 2(xxiv) of the Act. From the extract of the deed dated March 30, 1960, as well as power of appointment as granted in resolution dated January 24, 1976, it is clear that Anarkali was vested with the power to transfer the slice "A" funds of the trust without any limitation on her power and the power was capable of being exercised in favour of Anarkali herself also. In this view of the matter, the requirement of section 2(xxiv) that the exercise of power of appointment to determine its disposition in favour of any person other than the donee of the power very much covered the transaction in question by which Anarkali exercised power of appointment in favour of four other trusts who were not beneficiaries as per the trust deed dated March 30, 1960. They were certainly persons other than the donee of the power. Therefore, the ing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power of appointment, whether general or special or irrespective of any restriction as to whether the power could be exercised in favour of the donee or not. The circular therefore cannot be interpreted as laying down the law that even for the period prior to April 1, 1980, exercise of general power of appointment came to be exempted by the circular in question. In view of the above discussion, it is not necessary to refer to the authorities cited by Mr. Patel on the proposition that the circular in question is binding on the Revenue. Therefore, we answer question No. 1 in the affirmative, i.e., in favour of the Revenue and against the assessee. The second question pertains to the date on which the property in question stood transferred. The contention of the assessee was that although the power of appointment was exercised on March 31, 1976, the actual transfer of the property was to take effect on January 1, 2001, which subsequently came to be proponed by resolution dated December 1, 1977, of the trustees accelerating the effective date of the power of appointment. It was therefore submitted that the transfer did not take place in the year ended March 31, 1976. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this argument is not available to the assessee even on the facts. Coming to the last question which has been referred at the instance of the Revenue it is required to be noted that by exercising the power of appointment on March 31, 1976, no corpus of the trust fund was transferred but only the right of Anarkali to receive the trust funds came to be transferred by her in favour of the other four trusts of which she was the settlor. It is true that the corpus was transferred subsequently of which Anarkali was otherwise to receive income from slice "A" funds. Hence, there is no question of any gift having been made by Anarkali of the corpus of the trust and, therefore, the Tribunal was right in holding that the Gift-tax Officer was not justified in levying gift-tax on the value of the entire corpus since it was actually the assessee's interest in the property which was transferred. In view of the above discussion we answer questions Nos. (1) and (2) in the affirmative, i.e., in favour of the Revenue and against the assessee, while question No. (3) is answered in the negative, i.e., in favour of the Revenue and against the assessee. So far as question No. (4) is concerned, we ans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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