Immediate divestment of property treated as taxable gift; exemption for contemplation of death confined to statutory natural death requirements.

A declaration by a retiring partner directing immediate divestment and division of her movable assets among her brothers was treated as a transfer in praesenti and therefore a taxable gift under the Gift Tax Act. The Tribunal held that such a declaration could not be characterised as a will, because it operated immediately rather than on death, and it could not qualify as a gift in contemplation of death, which is confined to the statutory concept of natural death accompanied by illness and imminent expectation of death. The Revenue's appeal succeeded and the exemption claim failed.

---

---

Issues: Whether the declaration made by a retiring partner renouncing the world and directing division of her assets among her brothers amounted to a taxable gift under the Gift Tax Act or was excluded as a will or a gift made in contemplation of death.

Analysis: The Tribunal examined the declaration, the surrounding facts, and the statutory definition of "gift" and "transfer of property". One view treated the renunciation of worldly life as civil death and regarded the declaration as a unilateral testamentary arrangement falling within the exemptions for a will or a gift in contemplation of death. The contrary view held that the declaration was operative immediately, that the transfer of assets had taken place in praesenti, and that a gift in contemplation of death requires the statutory element of illness and expectation of imminent natural death. The third member agreed that the document effected a transfer of movable property and could not be treated as a will or as a gift in contemplation of death.

Conclusion: The declaration constituted a taxable gift and did not qualify for exemption under the Gift Tax Act; the Revenue's appeal succeeded.

Dissenting Opinion: The Judicial Member treated the declaration as a unilateral arrangement in the nature of a will or a gift made in contemplation of civil death and would have upheld the exemption.

Ratio Decidendi: A declaration directing immediate divestment of property in favour of others is a transfer amounting to gift under the Gift Tax Act, and exemption as a gift in contemplation of death is confined to the statutory concept of natural death with illness and imminent expectation of death.

---