Beneficial interest in trust property: relinquishment by a beneficiary was not a taxable gift under the Gift-tax Act.

A beneficiary's relinquishment of beneficial interest in trust property was treated as outside the scope of "gift" under the Gift-tax Act, 1958. The commentary explains that section 2(xii) requires a voluntary transfer of existing property without consideration in money or money's worth, while a beneficiary's right is only an enforceable interest against the trustees, not ownership of the trust property. On that basis, the release deeds executed in favour of other beneficiaries were characterised as mere relinquishment of beneficial rights and not as a transfer attracting gift-tax. The stated conclusion is that the transactions did not constitute taxable gifts and fell outside gift-tax liability.

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Issues: (i) Whether the assessees' release deeds executed in favour of the other beneficiaries amounted to a taxable gift under the Gift-tax Act, 1958. (ii) Whether the assessee's release of her beneficial interest in the trust corpus and income could be treated as a taxable gift within the meaning of the Gift-tax Act, 1958.

Issue (i): Whether the assessees' release deeds executed in favour of the other beneficiaries amounted to a taxable gift under the Gift-tax Act, 1958.

Analysis: A gift under section 2(xii) requires a voluntary transfer of existing property without consideration in money or money's worth. The rights released by the beneficiary were not ownership rights in the trust property but beneficial rights against the trustees. On the facts found, the deeds effected only a relinquishment of such beneficial interest and did not amount to a transfer of property falling within the charging concept of gift.

Conclusion: The release deeds did not constitute a taxable gift and the answer is in favour of the assessee.

Issue (ii): Whether the assessee's release of her beneficial interest in the trust corpus and income could be treated as a taxable gift within the meaning of the Gift-tax Act, 1958.

Analysis: The assessee, as a beneficiary, held only a right enforceable against the trustees. That beneficial interest was released in favour of the other beneficiaries. Such relinquishment was not shown to be a bilateral or multilateral transfer of property attracting section 2(xii) read with section 2(xxiv), and no basis was established for treating the transaction as a taxable gift.

Conclusion: The assessee's release of beneficial interest was not a taxable gift and the answer is in favour of the assessee.

Final Conclusion: The reference questions were answered against the Revenue, and the release deeds were held outside the scope of gift-tax liability.

Ratio Decidendi: A beneficiary's relinquishment of beneficial interest in trust property, without a transfer of ownership in property for consideration, does not amount to a "gift" under the Gift-tax Act, 1958.

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