Vesting of reversionary interest as taxable gift despite deferred possession under prior life interests

A voluntary settlement that vests an interest in immovable property on execution constitutes a gift under the Gift-tax Act even if possession and enjoyment are postponed by prior life interests. The Act's definition of "gift" is broader than the Transfer of Property Act and includes the creation or grant of an interest in property without consideration. Here, the donor retained a life interest, the wife received a further life interest, and the son took an absolute reversionary interest immediately on the deed's execution. Deferred enjoyment did not prevent the transfer of interest, so the transaction was taxable as a gift.

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Issues: Whether the settlement deed created a taxable gift in favour of the assessee's son notwithstanding that the son's right to possession and enjoyment was postponed until the expiry of the life interests.

Analysis: The definition of "gift" under the Gift-tax Act is wider than the definition in the Transfer of Property Act and covers any voluntary transfer of existing movable or immovable property without consideration, including the grant or creation of an interest in property. Under the settlement deed, the donor retained a life interest, his wife was given a further life interest, and the son was given an absolute right in reversion. The right in the property vested in the son on execution of the document itself, though enjoyment was deferred. The postponement of possession and enjoyment did not negate the transfer of interest. The decision relied on the breadth of the statutory definition and distinguished the contrary observations in the cited Bombay decision.

Conclusion: The transfer of interest in the settled property in favour of the son amounted to a gift taxable under the Gift-tax Act, and the question was answered against the assessee.

Ratio Decidendi: A voluntary transfer that vests an interest in immovable property on the date of the instrument is a taxable gift under the Gift-tax Act even if the donee's possession and enjoyment are postponed by prior life interests.

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