Gift-tax exemption for transfer to a trust created in the same deed was upheld.

Where a trust is created and property is dedicated to it in the same deed, the transfer is treated as a gift to an existing trust for purposes of exemption under section 5(1)(v) of the Gift-tax Act, 1958. The trust deed was read as creating the trust first and then making the dedication of property, so the gift was regarded as having been made after the trust came into existence. On that basis, the exemption was available to the assessee and the Department's challenge failed.

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Issues: Whether the assessee was entitled to exemption under section 5(1)(v) of the Gift-tax Act, 1958, when the trust deed and the gift of property to the trust were executed on the same date.

Analysis: The trust deed showed that the trust was created first and, in the same instrument, the property was dedicated to the trust. On that footing, the gift was made after the trust came into existence. The decision supports the view that where a single deed both creates the trust and transfers property to it, the transfer is treated as a gift to an existing trust for the purpose of the exemption.

Conclusion: The assessee was entitled to exemption under section 5(1)(v) of the Gift-tax Act, 1958.

Final Conclusion: The reference was answered in favour of the assessee, and the Department's challenge failed.

Ratio Decidendi: Where a trust is created and the property is dedicated to it in the same deed, the gift is regarded as having been made after the trust's creation and qualifies for exemption under section 5(1)(v) of the Gift-tax Act, 1958.

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