Trust deed variation altering beneficiaries and irrevocability did not create a fresh gift where property already vested in trustees.

Variation of a trust deed that only changes the class of beneficiaries and makes the trust irrevocable does not, by itself, create a fresh taxable gift under the Gift-tax Act, 1958, where the trust property had already been validly transferred to trustees and continued to vest in them. The later deed merely altered the mode of enjoyment and distribution of income; it did not bring the property back to the settlor, effect a new transfer to trustees, or expressly revoke and extinguish the original trust. On that basis, the amendment was held not to amount to a new gift, and no gift-tax liability arose on the variation.

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Issues: Whether variation of the trust deed dated 31 December 1970, by substituting clauses relating to beneficiaries and making the trust irrevocable, gave rise to a fresh taxable gift under the Gift-tax Act, 1958.

Analysis: The original settlement deed of 11 April 1961 created the trust and transferred the trust property to the trustees. The subsequent deed did not bring the trust property back to the settlor or create a new transfer of the same property to new trustees. It merely altered the mode of enjoyment and distribution of the income and revoked the earlier revocability clause. The trust property continued to vest in the same trustees, and the trust as created in 1961 was neither expressly revoked nor extinguished. A mere change in the subordinate terms governing administration and distribution of the trust property does not amount to a fresh transfer creating a new gift for purposes of gift-tax.

Conclusion: The variation made on 31 December 1970 did not create a fresh gift, and the assessee was not liable to gift-tax on that variation.

Ratio Decidendi: Where trust property has already been validly transferred to trustees and continues to vest in them, later amendments only to the terms of beneficiary enjoyment or irrevocability do not constitute a fresh gift unless there is a new transfer or an express revocation of the earlier trust.

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