Valid trust and taxable gift require effective transfer of existing property; mere intention without trustee acceptance is insufficient.

A transfer amounts to a gift under the Gift-tax Act only where existing property is effectively transferred, and a trust may qualify as such a transfer. A valid trust under the Indian Trusts Act requires clear intention, identifiable trust property and beneficiary, acceptance of the obligation, and transfer of the property to the trustee where author and trustees are different persons. Here, although the deed indicated an intention to create a trust, it was not signed by the trustees and did not effect a transfer of the right to receive compensation bonds. The settlor's subsequent conduct showed that he retained and treated the right as his own, so no valid trust or taxable gift arose.

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Issues: Whether the assessee was liable to gift-tax on Rs. 12,50,000 representing the value of his interest in the zamindari abolition compensation bonds.

Analysis: For a transfer to amount to a gift under the Gift-tax Act, there must be a transfer of existing property, and creation of a trust is included within the concept of transfer. A valid trust under the Indian Trusts Act requires, apart from a clear declaration of intention and identification of the trust property and beneficiary, acceptance of the obligation and transfer of the property to the trustee where the author and trustees are different persons. The deed in question, though showing an intention to create a trust, was not signed by the trustees and therefore did not by itself effectuate a transfer of the right to receive the compensation bonds. The subsequent conduct of the settlor showed that he never divested himself of the right and treated the bonds as his own.

Conclusion: No valid trust or taxable gift in respect of the claim to receive the compensation bonds came into existence, and the amount was not liable to gift-tax.

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