TMI Blog1977 (7) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... themselves and to pay and discharge all costs, charges and expenses incurred in or about the administration of the trusts of these presents. (2) Subject thereto to pay the residue of such dividends, interest and income to the said Jer Mavis Wadia, daughter of the settlor, for the period of her life for her sole and separate use without power of anticipation during any coverture. (3) From and after the death of the said Jer Mavis Wadia upon trust for the child or children or for such one or more exclusively of the others or other of the children or remoter issue (such remoter issue being then living) of the said Jer Mavis Wadia at such age or time or respective ages or times if more than one in such shares for the benefit of such child or children if more than one or remoter issue (such remoter issue being then living) some or one of them with such provisions for the maintenance, education, advancement and benefit of any child or all the children if more than one or remoter issue (such remoter issue being then living) at the discretion of the Trustees or of any other persons or person and upon such conditions with such restrictions and in such manner as the said Jer Mavis Wadi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their children would be accelerated in view of the fact that both Clara Evelyn Shafford and Jer Mavis Lubimoff proposed to release their respective rights of appointment reserved to them under sub-clause (3) of clause 2 of the settlements in question. On February 10, 1958, the assessee instituted another originating summons being Suit No. 71 of 1958 (O. S.) on the Original Side of this High Court for determination of the following question : " Whether on the plaintiff exercising irrevocably by a deed or writing the power of appointment reserved to her under clause 2(3) of the Jer Mavis Settlement No. 1 solely and exclusively in favour of defendant No. 3 (Elizabeth Anne, daughter of Jer Mavis Lubimoff) and upon her releasing her life interest in the trust funds of the said Jer Mavis Settlement No. 1 including the accretions thereto, the 3rd defendant, Elizabeth Anne will become immediately entitled absolutely to the aforesaid Trust Funds and accretions thereto ?" The High Court by its judgment dated February 12, 1958, held that on her exercising irrevocably by a deed or writing the power of appointment reserved to her under clause 2(3) of the trust settlement and also upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tarily under the Gift-tax Act. Ultimately, notice under section 15(2) of that Act was issued to her calling upon her to file a return. In response thereto the assessee submitted a return. It was contended on behalf of the assessee before the Gift-tax Officer that by reason of the execution of any of the above documents, namely, the deed of poll and the deed of release or relinquishment, there was no gift which was liable to be taxed under the Act. This contention was rejected by the Gift-tax Officer. He took the view that the assessee's life interest in the trust settlement was " property " under the Act ; that the assessee's invoking of section 4(1)(c) of the Act to the effect that the surrender by the deed of relinquishment being bona fide was exempt under the Act was due to a misapprehension of the scope of section 4(1)(c) as that section did not give exemption to a taxpayer. He rejected the contention on behalf of the assessee that by mere surrender of life interest there was no transfer of property. In short, he rejected all the contentions of the assessee as regards the surrender of life interest. Bearing in mind the age of the assessee, namely, 50 years, and applying the usu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust deeds ; that the deed of appointment merely defined the donee and did not cause the gift ; that the trust deed amounted to a gift by virtue of section 2(xxiv)(a) in 1927 and there was no question of taxing it in the year under appeal even if it amounted to a gift under section 2(xxiv)(c) as the first occasion to tax it excluded all the other subsequent occasions to do so ; and that the exercise of the power of appointment by the assessee did not amount to a second and distinct gift of the property and it is not covered by sub-clause (c) of section 2(xxiv). So far as the deed of release or relinquishment was concerned, the Tribunal held that such a deed did not amount to transfer of property in its normal or grammatical sense or within the meaning of section 2(xxiv) and consequently it did not amount to a gift ; that it was also not a gift by virtue of section 4(1)(c). According to the Tribunal by executing a unilateral declaration in writing surrendering her life interest in the property the assessee did not enter into a transaction as there were no two parties to the deed and section 2(xxiv)(d) had no application in the case. The Tribunal further held that one of the conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expression " transfer of property " given in section 2(xxiv)(c) because clause (c) was wide enough to include the definition of power of transfer. He submitted that what is required by clause (c) is that power of appointment, whether general or special, should be exercised so as to determine the disposition of a property in favour of any person other than the donee of the power. He contended that by the deed of poll or the power of appointment Mrs. Jer Mavis Lubimoff, the donee of the power, determined disposition of the property in favour of Mrs. Elizabeth Anne Guhl, her daughter, because it was covered by clause (c) and, therefore, it amounted to a transfer of property. Such a transfer of property according to his submission falls within the definition of the word " gift " as given in section 2(xii) of the Act. So far as the deed of release or relinquishment was concerned, he contended that it was a gift as it was a disposition within the definition of the expression " transfer of property " or a transaction entered into by the assessee with intent thereby to diminish directly or indirectly the value of her own property to increase the value of the property of her daughter, Mrs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction and if regard be had to the definition of the word " gift " given in section 2(xii) it is quite clear that " gift " as defined in that section refers to transfer by one person to another. That presupposes a bilateral transaction. As admittedly, in the present case, Mrs. Elizabeth Anne Guhl was not a party to the deed of release or relinquishment as it was unilaterally executed by Mrs. Jer Mavis Lubimoff, it can never be regarded as " transfer of property " as defined in section 2(xxiv) as sought to be contended by the revenue. So far as the contention on behalf of the revenue to the effect that the deed of release and/or relinquishment amounted to a " gift " within the meaning of section 4(1)(c) of the Act is concerned, his submission is that there is a clear finding of fact that it is a bona fide transaction and such a finding of fact cannot be the subject-matter of a question in a reference before the High Court. Thus, on these grounds he supported the findings of the Tribunal both in respect of the deed of poll as well as the deed of release or relinquishment as not being gifts within the meaning of the Act. Section 3 of the Act is the charging section and provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed February 25, 1958, amounted to a gift within the meaning of the Act. It is the contention of the revenue that by execution of the deed of poll there was the exercise of a power of appointment of property vested in Mrs. Jer Mavis Lubimoff who was not the owner of the property to determine its disposition in favour of her daughter, Mrs. Elizabeth Anne Guhl, i.e., a person other than the donee of the power. It was urged by Mr. Joshi on behalf of the revenue that by the deed of trust dated January 4, 1927, a general power of appointment was conferred upon Mrs. Jer Mavis is Lubimoff. That power of appointment is contained in clause 2(3) of the deed of trust above referred to and under that clause, omitting the unnecessary words,the trustees were to hold the trust funds, etc., from and after the death of the said Jer Mavis Wadia upon trust for the child or children or remoter issue of the said Jer Mavis Wadia subject to the directions, limitations or restrictions as therein contained as the said Jer Mavis Wadia shall whether covert or sole by any writing or writings with or without power of revocation and new appointment or by will or codicil at any time or times without transgressing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat having regard to the meaning of the expression if general power " and the expression " special power ", the power that has been conferred by clause 2(3) of the deed of trust is a special power of appointment. If any authority is required for such a proposition it is to be found in the case of Edulji Framroz Dinshaw v. Sir Cawasji Jehangir [1955] 57 Bom LR 763. One of the questions that came up for consideration in that case was whether the power conferred by will dated July 23, 1934, left by Framroz Edulji Dinshaw who died on January 3, 1936, was a general or special power of appointment. Under the will after bequeathing certain legacies, the deceased by clause 11 of the will directed that the rest and residue of his estate should be held upon certain trusts created for the benefit of his children as set out in the following sub-clauses of clause 11 : " (d) My trustees shall stand possessed of the capital and income of the trust fund in trust to divide the same into three equal shares and to appropriate one of such shares to each of my children now living, namely, Bachubai, Edulji and Maneckbai. (e) The share of the trust fund hereinbefore given to each child of mine s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the power to appoint conferred by clause 2(3) of the trust deed is a special power of appointment as it is capable of being exercised only in favour of the child or children or remoter issue of Mrs. Jer Mavis Lubimoff. The question to be considered is whether clause (c) of section 2(xxiv) of the Act is capable of including within its scope only exercise of general power of appointment or it is capable of including within its scope exercise of special power of appointment. Mr. Joshi in the course of the arguments urged that when the Act was drafted the legislature was conscious of the definitions of similar expressions given in other statutes and for example he referred to the definition of the expression " disposition of property " given in Australian Gift Duty Assessment Act and the defini- tion of the same expression given in New Zealand Death Duties Act. Section 4 of the Australian Gift Duty Assessment Act defines the expression disposition of property " as meaning any conveyance, transfer, assign- ment, settlement deliver , payment or other alienation of property and, without limiting the generality of the, foregoing, includes : (a) the allotment of shares in a compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any person, not the owner of the property, to determine its disposition in favour of any person other than the donee of the power. Mr. Joshi is right that the word " general " is omitted before the words " power of appointment ", but such omission by itself is not sufficient to conclude the matter. Clause (c) has to be interpreted as a whole and if upon proper interpretation of the language of clause (c) it is quite evident that it is referable only to exercise of general power of appointment then the mere omission of the word "general " before the words " power of appointment " will not be decisive of the matter. It is quite implicit in the language of clause (c) that the exercise of a power of appointment of property therein referred to must determine its disposition in favour of any person other than the donee of the power. The words " any person other than the donee of the power " clearly indicate that whenever such power is exercised it should be capable of being exercised in favour of anybody except the donee of the power. Such an ingredient can only be fulfilled if the power conferred is a general power of appointment. In case of a special power of appointment it can only b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on " transfer of property " given in section 2(xxiv). In support of this contention, reliance was placed by Mr. Joshi upon the decision of the Court of Appeal in England in the case of Inland Revenue Commissioners v. Buchanan [1958] 34 ITR 173 (CA). The facts of that case show that I., who died in 1927, by his will settled his residuary estate on such of his children as were living at his death and their issue. I had three sons, one of whom, G. D., was the daughter of G, and under the terms of the will and in the events which had happened she took a life interest in her father's share of the residuary estate expectant on his death, with remainder to her children. By her first marriage in 1930, D had three children. Her first husband died in 1945, and in 1948 she married the taxpayer. The will precluded life tenants from surrendering their interests except in favour of persons entitled in remainder, and on March 8, 1948, D surrendered in favour of her children her life interest in the testator's residuary estate expectant upon the death of G. On March 9, 1948, G also surrendered his life interest, whereupon D's children became entitled in interest, and on attaining 21, in possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e children, but they would not have been obliged to do so. She exercised the power which the will had given her to surrender in favour of her children and, therefore, I think she disposed of the interest to her children. It is undoubtedly true that in this case the Court of Appeal in England having regard to the definition of the expression " settlement " as given therein has taken the view that surrender of life interest was a disposition but before applying any principle laid down in an English case the court should take care to see whether having. regard to the language of the statute in India the ratio of such a decision in England can fit in with the construction of a section as given in the Indian statute. By the deed of release, as the operative part thereof indicates, Jer Mavis Lubimoff " hereby relinquishes, surrenders, releases and yields up all and singular her life interest And all other interests in the trust fund of the said settlment and all other rights and interests conferred on her the releasor under the said settlement to the intent that such life interest and other interests shall be for ever determined and extinguished and to the further intent that the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 599, the Supreme Court was not concerned with the effect of a deed of gift or a deed of release or surrender or relinquishment. Even while referring to the expression " disposition " it has not referred to all the aspects that the word connotes. Such a question was considered by the Supreme Court in an earlier judgment in the case of Goli Eswariah v. Commissioner of Gift-tax [1970] 76 ITR 675 (SC). In that case, the Supreme Court had occasion to consider the question whether, when a Hindu coparcener throws his self-acquired property into the common stock of joint undivided family property, it amounted to a " gift " or transfer or transaction or disposition within the meaning of those words as understood under the Gift-tax Act. Even the judgment in this case is given by Hegde J., to whose judgment in the other case reference was made by Mr. Joshi. In this case, the learned judge has been careful enough to point out the several aspects which the word " disposition " connotes. It is held that the word " disposition " is not a term of law. It has no precise meaning. Its meaning has to be gathered from the context in which it is used. In the context in which it is used in section 2( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 75, above referred to. The Supreme Court has there taken the view that the " transaction entered into " by one person with another, contemplated by clause (d) of section 2(xxiv) of the Act cannot apply to a unilateral act. The act must be one to which two or more persons are parties. The declaration by a coparcener whereby he impresses the character of joint family property on his self-acquired property does not fall within clause (d) of section 2(xxiv). Thus, it is quite clear that even the word " transaction " used in clause (d) of section 2(xxiv) refers to a bilateral transaction but not to a unilateral transaction. That such will be the connotation of the word " transaction " will be strengthened by the fact that if regard be had to the definition of the word " gift " in section 2(xii) of the Act, it will be found that the word " gift" contemplates transfer by one person to another. To the deed of release or relinquishment or surrender executed by Mrs. Jer Mavis Lubimoff nobody else is a party, much less Mrs. Elizabeth Anne Guhl. In fact, it is a document unilaterally executed by Mrs. Jer Mavis Lubimoff whereby she determined her life interest under the trust deed. It being a u ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
