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Issues: Whether the registered document dated 11 February 1969 created a present gift in favour of the daughters and grandchildren or was only testamentary in character as regards the future interests; and whether the life interest created in favour of the wife was exempt from gift-tax.
Analysis: The document created a present life interest in favour of the wife, but the absolute interest in favour of the daughters and grandchildren was expressly postponed until after the lifetime of the settlor and his wife. There was no present vesting of interest in those beneficiaries, and the wording showed that the future disposition was intended to take effect only on a future date. A transfer meant to operate after the executant's death, without present vesting and without an effective inter vivos transfer in favour of the alleged donees, is testamentary in character and does not amount to a gift for the purposes of the Gift-tax Act. The nomenclature of the document as a settlement deed was not decisive. The creation of life interest in favour of the spouse fell within the exemption for gifts to a spouse, and the value of that interest did not exceed the statutory limit.
Conclusion: The document was treated as a will so far as the daughters and grandchildren were concerned, not as a gift deed, and the assessee was not liable to gift-tax on that footing.
Final Conclusion: The reference was answered in favour of the assessee because the disputed future disposition was not a taxable gift, while the spouse's life interest remained exempt.
Ratio Decidendi: A document does not constitute a taxable gift in respect of future interests unless there is a present vesting of beneficial interest in the alleged donees and an effective inter vivos transfer capable of acceptance; a disposition postponed to take effect after the transferor's lifetime is testamentary in character.
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