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Issues: Whether the registered deed of settlement executed by the assessee in favour of his son created a present transfer of vested interest amounting to a taxable gift under the Gift-tax Act, or was only a testamentary disposition not chargeable to gift-tax.
Analysis: The document was construed as a settlement deed and not as a will because it expressly transferred and settled the property in favour of the son, reserved only a life interest to the settlor, made the arrangement irrevocable, and was registered as a settlement on payment of stamp duty. On the substance of the instrument, the settlee acquired a vested remainder in praesenti, even though possession and enjoyment were postponed until after the settlor's death. Applying the settled principles on interpretation of such instruments and the effect of vested interest under section 19 of the Transfer of Property Act, the cited precedents supported the Revenue rather than the assessee.
Conclusion: The deed effected a present transfer creating a taxable gift, and the gift-tax assessment was rightly sustained.
Ratio Decidendi: Where a registered and irrevocable settlement deed creates a vested interest in praesenti in favour of the transferee, the mere postponement of possession or enjoyment until the settlor's death does not make the instrument testamentary, and the transfer is chargeable as a gift.
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