Gift-tax exemption for donations to a charitable trust at inception was upheld where the trust already existed on the gift date.

A gift made by cheque on the day a charitable trust came into existence was treated as a gift to an existing trust or institution, not as a mere initial funding contribution. On those facts, the donation fell within the exemption for gifts to charitable trusts or institutions, and the amount was excluded from gift-tax assessment. The reasoning was reinforced by the broad construction of the exemption provision, which recognises gifts made at the inception of a trust where the trust is already in existence on the date of the gift.

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Issues: Whether the assessee was entitled to exemption under section 5(1)(v) of the Gift-tax Act, 1958, in respect of the gift of Rs. 1,00,000 made to Lira Raja Sahayak Trust.

Analysis: The gift was made by cheque on the same day on which the trust came into existence and was in the name of the trustees. On the facts found, the gift was treated as one made to an existing charitable trust or institution and not as a gift merely constituting the fund in the first instance. The cheque was also encashed later in the trust account, reinforcing the conclusion that the donation fell within the statutory protection. The exemption was further supported by the broad construction already placed on section 5(1)(v) by the Bombay High Court, which had held that gifts made at the inception of a charitable trust could still qualify for exemption.

Conclusion: The assessee was entitled to exemption under section 5(1)(v) of the Gift-tax Act, 1958, and the gift of Rs. 1,00,000 was not includible in the gift-tax assessment.

Ratio Decidendi: A gift made to a charitable trust or institution at its inception, where the trust is already in existence on the date of the gift, qualifies for exemption under section 5(1)(v) of the Gift-tax Act, 1958.

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