Gift-tax liability depends on real transfer of ownership; a family arrangement without vesting title is not a taxable gift.

Under the Gift-tax Act, a transaction is taxable as a gift only if it effects a real transfer of property by vesting ownership in the transferee. Reading the deed as a whole, the Kerala High Court found no clause transferring title and treated the recitals as showing only an arrangement during the transferor's lifetime, with permission to improve the property and obtain pattas, and postponed enjoyment and alienation. As the document did not amount to a transfer for consideration within section 4(1)(b) or a gift within section 2(xii), it did not attract gift-tax.

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Issues: Whether the deed dated 7 May 1963 amounted to a gift or other transfer of property within the Gift-tax Act, and whether gift-tax was payable on the transaction.

Analysis: Section 4(1)(b) of the Gift-tax Act applies only where property is transferred for consideration that has not passed or is not intended to pass in full or in part. A document which is not a transfer for consideration does not fall within that provision. The expression "transfer of property" in section 2(xxiv) contemplates an alienation involving vesting of title in the transferee, and the definition is understood as embracing bilateral transactions. The document was read as a whole, and no clause was found to vest the properties in the executees. The recitals showed only an arrangement during the transferor's lifetime, permission to improve and obtain pattas, and postponed enjoyment and alienation, which were inconsistent with an immediate transfer of ownership. On that construction, the transaction was not a gift within section 2(xii) and did not attract gift-tax.

Conclusion: The transaction evidenced by the deed was not a gift and did not give rise to liability to gift-tax.

Ratio Decidendi: Under the Gift-tax Act, a transaction is taxable as a gift only if it effects a real transfer of property by vesting ownership in the transferee; a mere family arrangement or set-apart without vesting does not constitute a gift.

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