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Commissioner of Gift-tax, Bombay City-i Vs. Jer Mavis Lubimoff - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtMumbai High Court
Decided On
Case NumberGift-tax Reference No. 2 of 1967
Judge
Reported in[1978]114ITR90(Bom)
ActsGift Tax Act, 1958 - Sections 2, 3 and 4(1)
AppellantCommissioner of Gift-tax, Bombay City-i
RespondentJer Mavis Lubimoff
Appellant AdvocateR.J. Joshi, Adv.
Respondent AdvocateR.J. Kolah, Adv.
Excerpt:
direct taxation - gift - sections 2, 3 and 4 (1) of gift tax act, 1958 - father of assessee created trust - after death of mother assessee appointed as one of trustees - whether it was legal and permissible for assessee to surrender and release her life interest in trust - clause (c) of section 2 (24) only applies to exercise of general power of appointment - deed of poll executed in exercise of power conferred by clause of trust deed - it conferred special power of appointment - transaction is not transfer of property under section 2 (24) - it is not gift under section 2 (12) - exercise by assessee of power of appointment vested in her under clause of trust deed by deed of poll not resulted in gift taxable under act. - - both the deed of poll as well as the deed of release were.....kantawala, c.j.1. mrs. jer mavis lubimoff, the assessee, is the daughter of sir nusserwanjee wadia. he executed a trust deed on january 4, 1927, and created a trust call jer mavis settlement no. 1. under the trust deed the following four persons were appointed as trustees : 1. sir nusserwanjee nowrojee wadia (sir ness wadia) 2. his wife, lady wadia. 3. sir cusrew wadia and 4. mr. leslie blunt. 2. on the death of lady wadia on april 19, 1946, by the deed of appointment dated december 30, 1946, the assessee was appointed as one of the trustees. 3. by clause 2 of the trust deed the trust properties were to be held for the following trusts and its provision are as under : '2. the trustees shall stand be possessed of the trust fund and of the dividends, interest and income to be derived.....
Judgment:

Kantawala, C.J.

1. Mrs. Jer Mavis Lubimoff, the assessee, is the daughter of Sir Nusserwanjee Wadia. He executed a trust deed on January 4, 1927, and created a trust call Jer Mavis Settlement No. 1. Under the trust deed the following four persons were appointed as trustees :

1. Sir Nusserwanjee Nowrojee Wadia (Sir Ness Wadia)

2. His wife, Lady Wadia.

3. Sir Cusrew Wadia and

4. Mr. Leslie Blunt.

2. On the death of Lady Wadia on April 19, 1946, by the deed of appointment dated December 30, 1946, the assessee was appointed as one of the trustees.

3. By clause 2 of the trust deed the trust properties were to be held for the following trusts and its provision are as under :

'2. The trustees shall stand be possessed of the Trust Fund and of the dividends, interest and income to be derived therefrom upon the following trusts, that is to say :-

(1) Upon trust in the first place to reimburse 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 provision 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 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 the Rule against Perpetuities appoint.

(4) In default of such appointment if none and subject to such if any upon trust for all the children or any of the child of the said Jer Mavis Wadia who being sons or son shall attain the age of 18 years or being daughters or daughter shall attain that age or marry under that age and if more than one in equal shares.'

4. On November 27, 1957, the assessee took out originating summons in Suit No. 375 of 1957 on the Original Side of this High Court for determination, inter alia, of the following question :

'1. Whether it is legal and permissible for the plaintiff to surrender and release her life interest in the Jer Mavis settlement No. 1, as proposed above

2. If the answer to the above question is in the affirmative, whether the trusts contained in clause 2(4) of Jer Mavis Settlement No.1 will be accelerated and take effect in favour of defendant No. 4 immediately on the plaintiff surrendering her life interest and releasing her power of appointment as mentioned in the plaint ?'

5. A similar originating summons was taken out by the assessee's sister, Countess Clara, in respect of a similar trust in her favour. The said two originating summons came up for hearing before Shelat J. By judgment delivered on January 22, 1958, the learned judge answered question No. 2 set out above in the affirmative. So far as question No. 2 above was concerned he held that upon Jer Mavis Lubimoff surrendering her life interest under the settlement in her favour and the accretion that that settlement would acquire and upon her releasing her right of appointment, the trust set out in clause 2(4) of the settlement in her favour would be accelerated and those trusts would take effect in favour of her children. He further held in the said judgment that the surrender of their respective life interests by Clara Evelyn Shafford (Countess Clara) and Jer Mavis Lubimoff did not amount to a transfer of their interests but amounted merely to a relinquishment by them of their interests under the respective settlements in their favour, which would effect the determination of the trusts in their favour, which would effect the determination of the trust in their favour. He further held that under clause 2(4) the trust in favour of 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.

6.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 accretion thereto, the 3rd defendant, Elizabeth Anne will become immediately entitled absolutely to the aforesaid Trust Funds and accretions thereto ?'

7. 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 her releasing the life interest in the trust fund including the accretions thereto to her daughter, Elizabeth Anne, the daughter would become immediately entitled absolutely to trust fund and the accretion thereto. The court further held that the assessee had the right by a deed in writing to appoint irrevocably her daughter, Elizabeth Anne, as the person to whom the trust funds under settlement should go immediately.

8. By a deed of poll executed on February 25, 1958, the assessee exercised the power of appointment vested in her under sub-clause (3) of the clause 2 of the trust deed in the following words :

'I... do hereby irrevocably appoint to may said daughter, Mrs.Elizabeth Anne Guhl, the Trust Funds subject to my prior life interest.'

9. On the next day, i.e., on February 26, 1958, the assessee executed a deed of release by which she relinquished, surrendered, released and yielded up her life interest and all other rights under the settlement to the intent that her life interest and all other interest should be for ever determined and extinguished, and that the trustees should hold the trust fund upon the trusts mentioned in sub-clauses (3) and (4) of clause 2 of the trust deed.

10. The assessee herself and her daughter, Mrs. Elizabeth Anne Guhl, are not the citizens of India and not residents of India. The assessee's nationality is Irish and she permanently resides in Paris, France. Mrs. Elizabeth Anne Guhl is a national of the United Kingdom and she permanently resides in Switzerland. Both the deed of poll as well as the deed of release were executed by the assessee in Paris. Neither to the deed of poll nor to the deed of release Mrs. Elizabeth Anne Guhl was a party. Both these documents were unilaterally executed by the assessee.

11. At the time of execution of the deed of release or relinquishment the trust fund consisted, inter alia, of 2500 ordinary shares of the Bombay Dyeing and ., of the face value of Rs. 250 each and 3% Mysore Government Loans, 1956-61, of the face value of Rs. 3,52,500. Upon execution of the deed of poll and the deed of release or relinquishment by the assessee the trustees handed over the corpus of the trust funds to Mrs. Elizabeth Anne Guhl, the assessee's daughter. For the assessment year 1958-59, for which the relevant previous year ended on March 31, 1958, the assessee did not file any return voluntarily 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 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 usual formula he valued the life interest at Rs. 8,86,053 and subjected it to gift-tax. So far as the deed of poll was concerned, it was contended on behalf of the assessee before the Gift-tax Officer that there was no gift, because under the definition of the expression 'transfer of property' given in section 2(xxiv)(c) of the Act it was only exercise of the general power of appointment that was contemplated and not special power of appointment. The Gift-tax Officer took the view that by execution of the deed of poll the remainder of the trust property vested in the assessee's daughter and that, therefore, there was a gift. He valued the trust property at Rs. 18,66,475 and after deduction the value of the life interest assessed as above, took the balance of Rs. 9,79,662 as the value of the property gifted by execution of the deed of poll.

12. In an appeal by the assessee, the Appellate Assistant Commissioner agreed with the conclusions arrived at by the Gift-tax Officer on the point as to the exercise of the power of appointment by execution of the deed of poll being a gift of the remainder of the trust property. On the question of release of life interest by the deed of release or relinquishment, the Appellate Assistant Commissioner did not agree with the Gift-tax Officer. He took the view that the Gift-tax Officer was not justified in interpreting the Gift-tax Act on the basis of a decision given in a foreign country and in a different context. He also held that the Gift-tax Officer was wrong in not applying the provisions of section 4(1)(c) of the Act. According to him, the value of the gift under the deed of appointment or deed of poll was Rs. 11,25,713 (instead ofRs. 9,79,622 assessed by the Gift-tax Officer) and that the value of the release of the assessee's right which, according to him was also gift, was Rs. 7,40,762. In the result, the assessment remained the same even after this order of the Appellate Assistant Commissioner.

13. In a second appeal preferred by the assessee the Tribunal upheld the contentions of the assessee and reversed the findings of the Gift-tax Officer as well as the Appellate Assistant Commissioner. The Tribunal held that the execution of the deed of appointment or the deed of poll did not result in any transfer of interest in the trust property nor did it in any way affect or interfere with the operation of the clauses of the 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 conditions essential for the application of section 2(xxiv)(d) was that the transaction should diminish the value of one's property and increase the value of another's and the deed of surrender had nothing to do with the residuary estate vested in the daughter.

14. From this order of the Tribunal the following two questions are referred us for our determination at the instance of the revenue :

'1. Whether, on the facts and in the circumstances of the case, the exercise by the assessee of power of appointment vested in her under clause 2(3) of the settlement dated January 4, 1927, by a deed of poll dated February 25, 1958, resulted in a gift taxable under the Gift-tax Act, 1958

2. Whether the release or surrender by the assessee of her life interest in the settlement dated January 4, 1927, by a deed of release dated February 26, 1958, in favour of her daughter, Elizabeth Anne Guhl, resulted in a gift taxable under the Gift-tax act, 1958 ?'

15. It may be stated that in question No. 2 as framed by the Tribunal the words 'in favour of her daughter, Elizabeth Anne Guhl' were added but upon the application of Mr. Dastur on behalf of the assessee we have deleted those words, because it is not the finding of the Tribunal that the deed of release or relinquishment executed by the assessee provided for any release or surrender in favour of her daughter, Elizabeth Anne Guhl.

16. Mr. Joshi on behalf of the revenue contended before us that both the taxing authorities were right in taking the view that the deed of appointment or the deed of poll amounted to a gift as defined under the Act. So also the deed of release or relinquishment executed by the assessee also amounted to a gift within the meaning of the Act. So far as the deed of appointment or the deed of poll was concerned, he submitted that it is a gift as defined in section 2(xii) of the Act read with the definition of the expression 'transfer of property' as given in section 2(xxiv). His contention was that by the deed of trust a general power of appointment was conferred upon Mrs. Jer Mavis Lubimoff and any exercise of such power of appointment amounted to 'transfer of property' within the meaning of section 2(xxiv)(c) of the Act. In the alternative he submitted that even if the power of appointment conferred by the trust deed was a special power of appointment it did fall within the definition of the 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 and to increase the value of the property of her daughter, Mrs. Elizabeth Anne Guhl. Even looked at from that point of view he submitted that such a deed of release will fall within the definition of the expression 'transfer of property' as given in section 2(xxiv)(d). Lastly,he submitted that in any event so far as the deed of release or relinquishment was concerned, it will be included as a gift having regard to the special provisions contained in section 4(1)(c) of the Act.

17. Mr. Dastur on behalf of the assessee on the other hand contended that the Tribunal was right in holding that neither the deed of poll nor the deed of release or relinquishment amounted to a transfer 'within the meaning of the Act so as to attract gift-tax'. So far as the deed of poll was concerned he submitted that section 2(xxiv)(c) provides for 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; that this clause refers to exercise of general power of appointment and has no application to exercise of special power of appointment. He emphasised that as this clause contemplates determination of disposition of property in favour of 'any' person other than the donee of the power it is quite implicit therein that the ambit of the power must be such that it can be exercised in favour of unrestricted class of persons other than the donee of the power; that as the under clause 2(3) of the deed of trust the power of appointment was capable of being exercised by Mrs. Jer Mavis Lubimoff only in favour of her children or remoter issue, it was clearly a special power of appointment and exercise of such a power of appointment by the deed of poll will not be 'transfer of property' within the meaning of section 2(xxiv)(c) of the Act. He wanted to urge contentions in the alternative in case such a contention was not accepted. However, we have not permitted him to do so because such alternative contentions were not required to be considered in the view that we were persuaded to take on interpretation of section 2(xxiv)(c). So far as the deed of release or relinquishment was concerned, he submitted that it was neither a disposition nor transaction falling within the meaning of the expression 'transfer of property' as defined in section 2(24). He submitted that both disposition and/or transaction contemplate a bilateral 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 one person to another. That presupposes a bilateral transaction. 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 provides as under :

'3. Charge of gift-tax Subject to the other provisions contained in this Act, there shall be charged for every assessment year commencing on and from the 1st day of April, 1958, a tax (hereinafter referred to as gift-tax) in respect of the gifts, if any, made by a person during the previous year (other than gifts made before the 1st day of April, 1957) at the rate or rates specified in the Schedule.'

18. It is quite evident upon the language of section 3 that it is only a gift as defined in this Act which is subjected to gift-tax under the Act. 'Gift' as defined at the relevant time under the Act means the transfer by one person to another of existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer of any property deemed to be a gift under that section. It is amply clear from this definition of the word 'gift' that it contemplates a bilateral transaction because under this definition in order that a transaction may amount to a gift it must be a transfer by one person to another, of the nature therein specified.

19. The expression 'transfer of property' is defined in section 2(xxiv) as under :

'Transfer of property, means any disposition, conveyance, assignment, settlement deliver, 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 person.'

20. Having regard to the definitions of the word 'gift' and the expression 'transfer of property' it is quite evident that unless the transfer in question is a transfer of property within the definition given in section 2(xxiv) it is never capable of being 'gift' within the meaning of the Act.

21. The first question that we have to consider in this case is whether the execution of the deed of poll dated 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 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 revocation and new appointment or by will or codicil at any time or times without transgressing the rule against perpetuities appoint. The argument of Mr. Joshi is that by this clause a general power of appointment is conferred upon Mrs. Jer Mavis Lubimoff. 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 disposition of property which he is not the owner he is said to have power to appoint such property. That this is not a special definition for the purposes of the Act but it merely enunciates the general meaning of the expression 'power to appoint' is evident even if we refer to the definition of that expression as given in section 2(13) of the Estate Duty Act, 1953. Section 2(13) of the Duty Act, 1953, defines that expression as under :

'Power to appoint property' means power to determined the disposition of property of which the person invested with the power is not the owner.'

22. That this is the correct meaning of that expression is also evident from Halsbury's Laws of England, volume 30, 3rd edition, paragraph 367, wherein it is, inter alia, stated that dispositive powers, more commonly known as powers of appointment, are powers authorising a person to create or dispose of beneficial interests in property. Such powers are usually sub divided into general powers and special powers. Paragraph 368 provides that a general power is a power that the donee can exercise in favour of such person or persons as he pleases, including himself or his executors and administrators. A special power can be exercised only in favour of certain specified persons or classes such as children or relations and friends of the donee. It is a question of construction whether a power is general or special. The power of appointment conferred by clause 2(3) of the deed of trust is not a general power of appointment because, it can only be exercised by Mrs. Jer Mavis Lubimoff, the donee of the power, only in favour of her child or children or remoter issue subject to the limitations directions and restrictions therein prescribed. Under this clause the beneficiary under the power can only be a member of a specified class, namely, child or children of Mrs. Jer Mavis Lubimoff or her remoter issue. Thus, it is quite clear that having regard to the meaning of the expression '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.

23. If any authority is required for such a proposition it is to be found in the case of Edulji Framroz Dinshaw v. Cawasji Jehangir [1955] 57 Bom LR 763. One of the questions that came up for consideration in that case 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 shall not vest absolutely in such child but shall be retained by my trustees and held by them upon the trusts hereinafter declared concerning the same respectively.

(f) During the life of such child my trustees shall pay the income of such share to him or her so that in the case of a daughter the same shall during coverture be without power of anticipation.

(g) After the death of such child my trustees shall hold such share and the future income thereof in trust for all or such one or more exclusively of the others of the children or remoter issue of such child age or time or respective ages or times, if more than one in such shares, and with such trusts for their respective benefit and such provisions for their respective advancement either after the death of such child or during his or her life with his or her consent and maintenance and education at the discretion of my trustees or any other person or persons as such child shall be any deed or deeds revocable or irrevocable or by will or codicil without transgressing the rule against perpetuities appoint.

(h) And in default of and subject to any appointment under the power hereinbefore contained in trust for the child or children of such child of mine who shall be living at my death or born afterwards and who being male attain the age of eighteen years or being female attain that age or marry, and if more than one in equal shares....'

24. One of the questions that arose before the court was whether the power of appointment contained in sub-clause (g) of clause 11 of the will was a general power of appointment or a special power of appointment. This court accepted the contention urged on behalf of the defendants in that case that it was the intention of the testator to grant special power of appointment to his children exercisable in favour of the children or remoter issue of such children. The power was a special power to be exercised in favour of the children or remoter issue of the donee, and the additional directions which may be given in appointing the share, were not an additional power. So far as the substance of the matter is concerned, the clause which came up for construction in this case is more or less similar to clause 2(3) of the trust deed and there can be no doubt having regard to the definition of expression 'general power' and 'special power', 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.

25. The question to be considered is whether the 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 referred to the definition of the expression 'disposition of property' given in Australian Gift Duty Assessment Act and the definition 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, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes :

(a) the allotment of shares in a company;

(b) the creation of a trust in property;

(c) the grant or creation of any lease, mortgage, charge, servitude, licence, power partnership or interest property;

(d) the release discharge, surrender, forfeiture or abandonment, at law or equity, of any debt, contract or chose-in action, or of any interest in property;

(e) the exercise of a general power of appointment of property in favour of any person other than the donee of the power; and

(f) 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 property of any other person.

Similarly, section 39 of the New Zealand Death Duties Act defines 'disposition of property' as under :

'Disposition of property means -

(a) any conveyance, transfer, assignment, settlement, delivery, payment or other alienation of property, whether at law or in equity;

(b) the creation of a trust;

(c) the grant or creation of any lease, mortgage, charge, servitude, licence, power, or other right, estate, or interest in or over any property whether at law or in equity;

(d) the release, discharge, surrender, forfeiture or abandonment, at law or in equity, or any debt, contract, or chose-in action, or of any right, power, estate or interest in or over any property; and for this purpose a debt, or any other right, estate, or interest, shall be deemed to have been released or surrendered when it has become irrecoverable or unenforceable through the lapse of time;

(e) the exercise of a general power of appointment in favour of any person other than the donee of the power;

(f) any transaction entered into by any person with intent thereby to diminish, directly or indirectly, the value of his own estate and to increase the value of the estate of any other person.'

26. The contention of Mr. Joshi was that if regard be had to the definition of the expression 'disposition of property' given in the above two statutes it is quite clear that the legislature in both the cases was careful enough to use the expression 'general power of appointment' while in the present case, in defining the expression 'transfer of property', the word 'general' is omitted in clause (c) of section 2(xxiv) and it merely refers to the exercise of a power of appointment of a property vested in any person not the owner of the property, 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 '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 reading of clause (c) it is quite evident that even though the expression 'general power of appointment' is not specifically used, it is referable to only general power of appointment because the power must be such that it should be capable of being exercised to determined the disposition of property in favour of any person other than the donee of the power. Thus, in our opinion, the Tribunal was right in taking the view that clause (c) only applies to exercise of a general power of appointment and in the present case as the deed of poll was executed in exercise of the power conferred by clause 2(3) of the deed of trust it conferred a special power of appointment, the transaction is not a transfer of property within the definition of that expression given in section 2(xxiv) and can never amount to a gift as defined in section 2(xii) of the Act.

27. As this decision arrived at is sufficient to dispose of his contention, it is unnecessary for us to consider the other aspects of the matter which were sought to be urged by Mr. Dastur in connection with the interpretation of section 2(xxxiv)(c). In our opinion, the Tribunal was right in taking the view that the exercise by the assessee of the power of the appointment vested in her under clause 2(3) of the settlement dated January 4, 1927, by the deed of poll dated February 25, 1958, did not result in a gift taxable under the Act. Thus, our answer to question No. 1 above referred to is in the negative.

28. That takes us to the second question that has been referred to us for our determination. It relates to the question whether the execution of the deed of release or surrender or relinquishment by the assessee, Jer Mavis Lubimoff, amounted to a 'gift' as defined in this Act. On behalf of the revenue the finding of the Tribunal that it is not a 'gift' is sought to be challenged challenged on three grounds. First, it was contended by Mr. Joshi that the deed of release, or surrender or relinquishment executed by Mrs. Jer Mavis Lubimoff on February 26, 1958, was a 'disposition' as that word is understood in the definition of the expression '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 Commissioner v. Buchanan : [1958]34ITR173(Cal) . 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 person 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 the D's children became entitled in interest, and on attaining 21, in possession to G's share of the residuary estate.During the children's minority the income was applied by the trustees of the will for their maintenance. Assessments to surtax for the years 1949-50 and 1950-51 were made upon the taxpayer on the footing that the income paid to his wife's children by her former marriage was, under section 21 of the Finance Act, 1936, deemed to be the income of the mother, and that the taxpayer was, accordingly, liable to include such income in his total income for the purposes of surtax. The taxpayer appealed. It was held by the Court of Appeal, that the surrender by D. of her life interest was a disposition and, accordingly, a 'settlement' within the meaning of section 21 (9) of the Finance Act, 1936, that in consequence of that disposition the income in question was paid for the benefit of the children of the settlor within the meaning of section 21, and that, accordingly, the assessments in question were rightly made. Relying upon this decision, where it was held that the surrender by D. was a disposition, the argument of Mr. Joshi was that in the present case the surrender of the life interest by Mrs. Jer Mavis Lubimoff by the deed of release or relinquishment or surrender was also a disposition within the meaning of the definition of the expression 'transfer of property' given in section 2(xxiv) of the Act.

29. While dealing with the contention of the counsel that surrender was not a disposition, Lord Goddard C.J. at page 178 observed :

'I should have great difficulty in holding that : I think it clearly is a disposition. A person can dispose of his interest in a fund or in a chattel in anything else in a variety of ways, but if, having an interest in a fund although the interest may not then be in possession, he surrenders that interest, it seems to me that he disposes of that interest. Still more is it clear in my mind that if he surrenders the interest the persons next entitled to that interest or to the income under the interest become thereby advanced.

In my opinion, when Lady Dufferin executed the surrender in question she did dispose of her interest under her grandfather's will, and she could only dispose of it to her children as otherwise she would have forfeited the interest altogether and then it would have become subject to various trusts under which, no doubt the trustees, might have applied it in favour of the 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 the children.'

30. 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 s 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.

31. By the deed of release, as the operative part thereof indicates, Jer Mavis Lubimoff 'hereby reliquishes, surrenders, releases and yields up all and singular her life interest and all other interest in the trust fund of the said settlement 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 trustees shall hold the trust fund upon the trusts mentioned in the hereinabove recited sub-clauses (3) and (4) of clause 2 of the said settlement'. This deed of release is only executed by Mrs. Jer Mavis Lubimoff and Mrs. Elizabeth Anne Guhl was not a party thereto nor had she executed the same. What we have to consider in the present case is, having regard to the special definition of the expression 'transfer of property as given in section 2(xxiv) of the Act, Whether such a deed of release can be regarded as transfer so as to amount to a 'gift' within the meaning of section 2(xii). One of the things which included in the expression 'transfer of property' is 'disposition' and the argument of Mr. Joshi on behalf of the revenue is that such a deed of release is a disposition as understood in law. In support of this contention reliance was placed by him upon the decision of the Supreme Court in the case of Commissioner of Gift-tax v. N.S.Getti Chettiar : [1971]82ITR599(SC) . In that case before the Supreme Court, the question that came up for consideration was whether in partition of property of a Hindu undivided family if one coparcener allotted greater share to other member of coparcenary than that to which they were entitled, would amount to a 'gift' within the meaning of the of the Act and would be subject to gift-tax. The Supreme court held that the partition did not effect any transfer as generally understood in law and did not, therefore, fall within the definition of 'gift' in section 2(xii) of the Act. While considering this question the Supreme Court considered the meaning of the various expression which are used in the considered the meaning of the various expressions which are used in the definition of the phrase 'transfer of property' while dealing with what 'disposition' in law means at page 606, Hedge J. points out that the word 'disposition' in the context, means giving away or giving up by a person of something which was his own. Relying upon this meaning given to the word 'disposition' the argument of Mr. Joshi is that as by the deed of release, surrender or relinquishment Mrs. Jer Mavis Lubimoff gave up her life interest conferred upon her under deed of trust dated January 4, 1927 it amounted to a disposition notwithstanding the fact that Mrs. Elizabeth Anne Guhl was not a party to the deed of release nor as executant thereof. In the first place, in N.S. Getti Chettiar case : [1971]82ITR599(SC) , 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 considered by the Supreme Court in an earlier judgment in the case of Goli Eswariah v. Commissioner of Gift-tax : [1970]76ITR675(SC) . In that case, the Supreme Court had occasion to consider the question whether, when a Hindu coparcener throw 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 Hedge 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 aspect 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(xxiv), it cannot means 'to dispose of'. In that sub-section, it is used along with the words 'conveyance, assignment, settlement, delivery, payment or other alienation of property'. Hence, it is clear from the context that the word 'disposition' therein refers to a bilateral or a multilateral act. It does not refer to a unilateral act. It does not refer to a unilateral a unilateral act. It is clear from this meaning given to the word 'disposition' that in order that disposition may amount to 'transfer of property' within the meaning of section 2(xxiv) it must be a bilateral a multilateral act and unilateral act can ever amount to 'transfer of property'. Such will be the proper connotation the word 'disposition' when one will have regard to the definition of the word 'gift' because the word 'gift' as defined in section 2(xii) means 'the transfer by one person to another of any existing movable or immovable property'. A transfer to which two persons are not parties can never amount to a gift. In the present case, the deed of release or relinquishment or surrender is only executed by Mrs. Jer Mavis Lubimoff. To that document nobody else is a party, much less Mrs. Elizabeth Anne Guhl. It is a simple unilateral document whereby Mrs. Jer Mavis Lubimoff extinguished and determined her life interest conferred upon under the true deed dated January 4, 1927 It being a purely unilateral act could never amount to a disposition as understood or defined by the Supreme Court in Goli Eswariah's case : [1970]76ITR675(SC) . Unless an act is a bilateral or multilateral act it will not amount to a disposition. One thing is clear that a mere unilateral act cannot amount to a deposition as understood under section 2(xxiv) in the definition of the expression 'transfer of property'

32. That takes us to the second contention of Mr. Joshi that the deed of release or surrender or relinquishment is a transaction entered into by Mrs. Jer Mavis Lubimoff with intent thereby to diminish directly or indirectly the value of her own property and to increase the value of the property of her daughter, Mrs. Elizabeth Anne Guhl, and would, therefore amount to a 'transfer of property' within the meaning of clause (d) of section 2(xxiv). Even the expression 'transaction entered into' used in clause (d) of section 2(xxiv) has come up for construction before the Supreme Court in Goli Eswariah's case : [1970]76ITR675(SC) 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 unilateral act is not a 'transfer of property' within the meaning of section 2(xxiv) nor even a 'gift' within the meaning of section 2(xii) of the Act.

33. That takes us to the last contention of Mrs. Joshi that in any event it is to be regarded as a gift under the provisions of section 4(1)(c) of the Act. The relevant part of the section is as under :

'4. (1) For the purposes of this Act, -..

(c) where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge surrender, forfeiture or abandonment, to the extent to which it has not been found to the satisfaction of the Gift-tax Officer to have been bona fide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment..'

34. The answer to such a question will depend upon the finding as to whether the Gift-tax Officer was satisfied that the deed of release, surrender, etc., has not been found to have been bona fide. In fact, this is a question of fact on which the Tribunal has given a clear an unequivocal finding that it is impossible to come to the conclusion that the deed of release is not executed impossible to come to the conclusion that the deed of release is not executed bona fide. Such a finding cannot be challenged in a reference before the High Court, because it is only restricted to determined questions of law arising from the order of the Tribunal. Such contention is not open to Mr. Joshi so far as the deed of release or surrender or relinquishment is concerned.

35. These findings, in our opinion, are sufficient to dispose of this reference and it is unnecessary for us to consider whether there are any possible aspects which could be urged by counsel on behalf of the assessee. Our answer to question No. 2 is in the negative and in favour of the assessee. The revenue shall pay the costs of the assessee.


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