Initial gift to a simultaneously created charitable trust qualifies for gift-tax exemption under the trust fund principle.

An initial transfer made under the same settlement deed to a trust created simultaneously with the gift was treated as a gift to a charitable fund for exemption purposes. The reasoning was that the trust or fund could be regarded as coming into existence before the transfer, even if only momentarily, so the founder's first contribution was not denied the benefit available to later gifts to the same fund. The initial gift was therefore exempt under section 5(1)(v) of the Gift-tax Act, and the Revenue's request for reference was rejected.

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Issues: Whether an initial gift made by the assessee to a trust created under the same settlement deed was exempt under section 5(1)(v) of the Gift-tax Act.

Analysis: The trust was created simultaneously with the gift under the same instrument, and the gift was made to a trust established for a charitable purpose. For the purpose of exemption, the trust or fund was treated as having come into existence before the gift, though only momentarily, so that the initial transfer could be regarded as a gift to the fund. The reasoning adopted the view that there is no basis to deny exemption to the founder's initial contribution when subsequent gifts to the same fund are exempt.

Conclusion: The initial gift was held to be exempt under section 5(1)(v) of the Gift-tax Act, and the Revenue's request for reference was rejected.

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