Testamentary character of a settlement deed prevails where no present interest passes and enjoyment is postponed until death.

A deed styled as a settlement was treated as testamentary in character where the executants retained enjoyment for life and the beneficiaries were to take only after their deaths. The Court held that the label of the instrument, its registration, and an irrevocability clause were not conclusive; the document had to be read by its substance and operative disposition. Because no interest passed in praesenti to any settlee, the instrument was a will and not a gift, so it did not constitute a taxable transfer under the Gift-tax Act, 1958.

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Issues: Whether the deed styled as a settlement, but reserving enjoyment to the executants during their lifetime and postponing the beneficiaries' enjoyment until after their deaths, was a will or a gift attracting the Gift-tax Act, 1958.

Analysis: The decisive test was the nature of the disposition and whether any interest passed in praesenti. The document's description as a settlement, its registration, and the clause making it irrevocable were held not conclusive. Reading the instrument as a whole, the settlors retained enjoyment for life, the sons were to take only after the death of the settlors, and the heirs of the sons were to take only after the sons' deaths. No present transfer of interest was created in favour of any settlee. The Court treated the instrument as testamentary in character and distinguished authorities where present transfer or vested interest was found on the wording of the particular document.

Conclusion: The document was a will and not a gift. It did not amount to a taxable transfer under the Gift-tax Act, 1958, and the question was answered in favour of the assessee.

Ratio Decidendi: A document must be construed by its substance and operative disposition, and where no interest passes in praesenti and the beneficiaries take only on the executant's death, the instrument is testamentary and not a gift, regardless of its label, registration, or irrevocability clause.

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