Vested beneficiary rights under a trust deed do not create a taxable gift when the trustee later delivers the property.

A trust deed that confers an absolute vested right on the beneficiaries and leaves the trustee with only a fiduciary duty to deliver the property does not create a taxable gift when the property is later handed over in accordance with the deed. The delivery is treated as implementation of the earlier covenant, not a transfer by the trustee without consideration, so the statutory definition of gift and the deeming provisions of the Gift-tax Act do not apply. On those facts, the transaction was outside sections 4(1)(a) and 4(1)(c).

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Issues: Whether handing over the swords to the princes under the trust deed constituted a gift or deemed gift attracting gift-tax.

Analysis: The trust deed created absolute rights in the princes on their marriages, and the trustees were bound only to hand over the swords in fulfilment of that covenant. The trustees had no beneficial or absolute ownership in the swords and held them merely in a fiduciary capacity. The later trust deed did not reserve any enforceable power in the settlor to alter the earlier grant, and the princes' subsequent receipt of the swords did not amount to a transfer by the trustees without consideration. The statutory definition of gift and the deeming provisions therefore did not apply on these facts.

Conclusion: The transaction was not a gift within the meaning of the Gift-tax Act, and sections 4(1)(a) and 4(1)(c) were inapplicable. The reference was answered in favour of the assessee and against the Revenue.

Final Conclusion: The receipt of the swords pursuant to the trust deed was treated as the implementation of an already vested beneficial right, not as a taxable gift by the trustees.

Ratio Decidendi: Where a trust deed confers an absolute vested right on the beneficiary and the trustee has only a fiduciary duty to hand over the property, subsequent delivery in accordance with the deed does not amount to a transfer by the trustee or a deemed gift under the Gift-tax Act.

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