TMI Blog1985 (6) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... d the assessee. On 24-1-1976, the trustees by a resolution gave a power of appointment in respect of a portion (Slice A) of the properties to the assessee that they would hold it with effect from 1-4-2001 or to the death of the last survivors of some other beneficiaries under the trust for such person including the assessee as she may appoint. By the same resolution, the trustees also reserved authority to direct that the power of appointment exercised by her shall come into force on a date earlier than 31-3-2001 and thereupon the interest of the assessee and another beneficiary in the income shall cease and the trustees shall act accordingly. On 31-3-1976 the assessee exercised the power of appointment irrevocably in favour of certain new trusts. On 1-12-1977 the trustees of the original Bharatidevi Trust resolved that the said power of appointment exercised by the assessee shall come into operation with effect from 1-12-1977 and the interest of the assessee and another beneficiary in the net income of the said portion of the property shall cease with effect from that date and that the trustees shall transfer the said portion of the properties to the new trusts as directed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny one or more of them to the exclusion of others or other of them in such proportions and in such manner and at such time or times as the trustees may in their absolute discretion think fit. (a) (b) From and after 1-1-1967 amongst Gira Sarabhai, Geeta Mayor, Vikram and settlor's daughter Smt. Anarkali Sarabhai or the survivors or survivor of them. II. Resolution dated 24-1-1976 (at page 14 of paper book) Resolved unanimously that in exercise of the discretion vested under clause 1 of the trust deed, the trustees do hereby set apart a portion of the trust funds represented by the investments more particularly specified in the schedule A hereunder written held directly or through partnership (which portion of the trust funds is hereinafter referred to as the 'Slice A of the trust funds') and shall deal with the said slice A of the trust funds in the following manner: (a) The trustees shall pay the net income of the slice A of the trust funds arising or accruing during the period from 1-4-1976 and up to and including 31-3-1978 to Smt. Anarkali Sarabhai for her absolute use and benefit and the trustees shall subject to the interest of the said Smt. Anarkali Sarabhai and Gira S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -4-2001 or the date of the death of the last survivor of Gira Sarabhai, Geeta Mayor and Smt. Anarkali Sarabhai whichever date is earlier the investments forming part of the slice A of the trust funds shall be transferred and assigned by the trustees of the said deed of settlement dated 30-3-1960 to the trustees of the following trusts. IV. Resolution dated 1-12-1977 of the trustees of Bharatidevi Trust Resolved that the trustees, in pursuance of the power vested in them under the resolution passed by them at the meeting held on 24-1-1976 do hereby unanimously direct that the power of appointment exercised by Smt. Anarkali Sarabhai shall come into force with effect from 1-12-1977 and that the interest of Smt. Anarkali Sarabhai and of Gira Sarabhai in the net income of the slice 'A' of the trust funds more particularly described in the Schedule 'A' hereunder written, shall cease with effect from the said date, i.e., 1-12-1977 and that the trustees shall divide the said slice 'A' of the trust funds and transfer and assign to each of the following trusts the portion of the slice 'A' of the trust funds allocated to each of them as per particulars given below in terms of the power of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows: "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 be exercised amongst members of a specified class. The words 'any person' will not fit in if clause (c) contemplated a special power of appointment because, if that is so, such power is not capable of being exercised by any and every person other than the donee of the power. Thus, on a plain readin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry subtle argument was developed by him that under the original trust deed the corpus of the trust could be given only to certain beneficiaries and since the assessee exercised the power of appointment in favour of trust which were not the beneficiaries under the original trust deed, it must be said that the assessee had full title and right to the property in question which she in turn gave to the newly created trust. The argument was that the trustees did not have any power of delegation of their own power under the original trust deed to any of the beneficiaries and the beneficiary assessee was not exercising such power, it could not, therefore, be said that there was a transfer from the trustees of the original Bharatidevi Trust to the new trust merely under the direction of the assessee. Under that trust deed the trustees did not have any power to transfer the corpus to the new trust. Therefore, there could not be any direct transfer by these trustees to the new trust. If there was such a transfer by them that would be invalid. But the trustees are presumed to act within their powers and so the inference is that what they had done was to transfer a certain property to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s exercise. Its significance is co-extensive with its exercise and no more. From the point of view of the Legislature it would make no difference what the scope of that power is. It does not stand to reason that the Legislature would tax the gift made in exercise of a general power and not tax it when made in exercise of a special power. A distinction without any purpose cannot attribute to the Legislature. From the point of view of the Legislature it is not material to whom the gift is made or in exercise of what kind of power provided it is made to a person other than the donee of the power. The expression 'any person other than the donee of the power' has to be read as a whole and the word 'any' cannot be read in isolation. All that this expression means is that the appointee should not be the donee of the power. Provided this requirement is satisfied it could be a person who could either fall in a specified category or not. The requirement of the word 'any' would be satisfied provided the appointee is not the donee of the power. If the appointee is the donee of the power then it would be a straight gift from the donor of the power of appointment to the donee of that power. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is not the scope of the power but its exercise which is relevant. Since in this case the power has been exercised in favour of persons other than the donee of the power there has been a transfer although it could have been exercised in favour of the donee herself. 15. Regarding Shri Mehta's argument based on the words 'in such manner' in the Bharatidevi Trust deed we are bound to say that that expression cannot cover authority to transfer the corpus to persons other than beneficiaries. This meaning is so plain that no further reasons are necessary. No part of the instrument can be so read as to clash with another part. Here if the trustees had such a power the naming of the beneficiaries in the trust deed would become useless. Therefore, it cannot be said that there has been a direct transfer from the trustees of the Bharatidevi Trust to the new trust. 16. The Commissioner (Appeals) has held that there has been a multilateral transaction in this case because the trustees of the Bharatidevi Trust had accelerated the date for the coming into effect of the power of appointment which had been exercised. This question would have relevance only if it was necessary to conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit of the assessee or other persons as appointed by her including herself. This presumes that the assessee live up to that point of time. Therefore, she had no vested life interest in the corpus. Question has been raised as to the assessment year in which transfer is said to have been made. The simple answer is that since the exercise of power of appointment amounted to transfer as defined under section 2(xxiv)(c) the taxable event, i.e., the gift occurred in the assessment year 1976-77. 19. The last question is regarding the valuation of the property which has been transferred. For this purpose only the interest of the assessee in the property has to be value of the entire corpus cannot be taken because as on the date of exercise of power of appointment that was not owned by the assessee. What the assessee had on that date was the expectation of receiving that corpus on a date mentioned in the first resolution of the trustees dated 24-1-1976 subject to any interest of any person in the income of the corpus. It is this which will have to be valued. While making this valuation it is important to bear in mind that the trustees had the power of advancing the date of coming into ..... X X X X Extracts X X X X X X X X Extracts X X X X
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