Creation of trust in property without consideration treated as a taxable gift under the Gift-tax Act.

Creation of a trust in immovable property, when made voluntarily and without consideration, constitutes a transfer under section 2(xxiv)(a) because the statutory definition expressly includes creation of a trust in property. Where the family members had assented to the transfer and the trust deed was treated as valid in related income-tax proceedings, the transfer of the existing property was properly characterised as a gift under section 2(xii). The result was that the transfer fell within the Gift-tax Act and was taxable as a gift.

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Issues: Whether the creation of a trust in respect of immovable property, without consideration, constituted a transfer amounting to a taxable gift under the Gift-tax Act.

Analysis: The trust deed had already been treated as valid in related income-tax proceedings, and the factual matrix showed assent by the family members to the transfer of the properties to the trust. On that basis, the creation of the trust fell within the statutory concept of transfer under section 2(xxiv)(a), which expressly includes creation of a trust in property. As no consideration was shown, the transfer of existing immovable property was voluntary and without consideration, bringing it within the definition of gift under section 2(xii).

Conclusion: The question was answered in the affirmative and against the assessee; the transfer was correctly held to be a taxable gift.

Ratio Decidendi: Creation of a trust in property, when effected voluntarily and without consideration, constitutes a transfer and a taxable gift under sections 2(xxiv)(a) and 2(xii) of the Gift-tax Act, 1958.

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