Gift-tax does not arise where Mutt offerings are applied under an existing obligation to a trust for religious and charitable objects.

Offerings received by the head of a Mutt as padhakanikkai and sambhavanai were treated as impressed with an obligation from receipt to be applied for the Mutt's religious and charitable objects. The creation of a trust for those objects did not convert the receipts into the personal property of the assessee, because the trust operated only to give effect to the existing burden on the funds. On that basis, the arrangement was treated as a vesting declaration rather than a transfer of ownership for gift-tax purposes, and section 2(xxiv) of the Gift-tax Act, 1958 was not attracted.

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Issues: Whether the offerings received by the head of a Mutt and applied to a trust created for the Mutt's religious and institutional purposes amounted to a gift liable to gift-tax, and whether the application of those funds to the trust involved a transfer of ownership by the assessee.

Analysis: The offerings were received as padhakanikkai and sambhavanai from devotees for religious purposes connected with the Mutt. Such receipts were treated as subject, from the moment of receipt, to an obligation to be applied for the Mutt's religious and charitable objects. The creation of the trust was only a means of giving effect to that existing burden and did not change the character of the money into the personal property of the assessee. The reasoning accepted that the trust arrangement functioned as a vesting declaration and not as a transfer of property to another in the sense required for gift-tax. On that footing, section 2(xxiv) of the Gift-tax Act, 1958 was held not to be attracted.

Conclusion: The application of the offerings to the trust did not amount to a gift and no gift-tax liability arose.

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