Special power of appointment and unilateral release of life interest were not taxable gifts under the Gift-tax Act.

A special power of appointment exercised under a trust deed was not a taxable gift under the Gift-tax Act because the statutory definition of gift requires a transfer by one person to another, and section 2(xxiv)(c) was read as covering only a general power of appointment, not a power limited to a defined class. A unilateral deed of release surrendering a life interest also was not a gift, because a disposition or transaction under section 2(xxiv)(d) requires a bilateral or multilateral act, not the holder's own extinguishment of interest alone. The alternative reliance on deemed gift provisions likewise failed on the facts found.

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Issues: (i) Whether the exercise of the power of appointment under the trust deed by deed of poll resulted in a gift taxable under the Gift-tax Act, 1958; (ii) Whether the release or surrender of the life interest by deed of release amounted to a gift taxable under the Gift-tax Act, 1958.

Issue (i): Whether the exercise of the power of appointment under the trust deed by deed of poll resulted in a gift taxable under the Gift-tax Act, 1958

Analysis: The charging provision applies only to a "gift" as defined in the Act, and the statutory concept of gift requires a transfer by one person to another. The power conferred by the trust deed was limited to the donor's children or remoter issue and was therefore a special power of appointment. Section 2(xxiv)(c) of the Act, read in context, covers only the exercise of a general power of appointment, because it contemplates determination of disposition in favour of any person other than the donee of the power. A special power exercisable only within a defined class does not answer that description.

Conclusion: The deed of poll did not result in a gift taxable under the Act.

Issue (ii): Whether the release or surrender of the life interest by deed of release amounted to a gift taxable under the Gift-tax Act, 1958

Analysis: A disposition or transaction within section 2(xxiv) requires more than a unilateral extinguishment of one's own interest; it must be a bilateral or multilateral act. The deed of release was executed only by the assessee and was not a transaction to which the beneficiary was a party. It therefore did not constitute a disposition or a transaction within section 2(xxiv)(d), and so could not be treated as a gift under section 2(xii). The alternative reliance on section 4(1)(c) also failed because the Tribunal's finding that the release was bona fide could not be disturbed in reference.

Conclusion: The deed of release did not result in a gift taxable under the Act.

Final Conclusion: The reference was answered entirely against the revenue, and neither the appointment by deed of poll nor the unilateral release of life interest attracted gift-tax.

Ratio Decidendi: Under the Gift-tax Act, a special power of appointment and a unilateral surrender of interest are not taxable gifts unless they amount to a bilateral transfer of property within the statutory definition.

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