Prospective effect of trust deed rectification decree controls exemption timing under the Gift-tax Act, leaving earlier years untouched.

A civil court decree rectifying a trust deed operates only prospectively and does not alter the tax position for earlier assessment years. Applying that rule, the Tribunal treated the trust's exemption claim as available only from the date of the 29 April 1981 decree and not for prior periods under the Gift-tax Act. The Revenue's challenge failed, and the exemption granted for the relevant gift-tax year was left undisturbed.

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Issues: Whether the assessee-trust was entitled to exemption under section 45(e) of the Gift-tax Act for the assessment year 1985-86 on the basis of a declaratory decree deleting objectionable trust clauses, and whether such decree operated retrospectively or only prospectively.

Analysis: The trust deed had been modified by a civil court decree dated 29 April 1981. The governing principle applied was that a civil court decree permitting rectification of a trust deed operates only from the date of the decree and does not rewrite the legal position for earlier assessment years. The same principle had already been applied in the assessee's income-tax assessments, where exemption was accepted only from the date of the decree and not for earlier years. On that basis, the Tribunal followed the settled rule and granted the exemption for the relevant gift-tax year.

Conclusion: The assessee was entitled to exemption from the date of the civil court decree, and the Revenue's challenge to that view failed.

Final Conclusion: The appeal was rejected, and the Tribunal's grant of exemption was left undisturbed.

Ratio Decidendi: A decree rectifying a trust deed has only prospective effect and cannot alter tax liability for periods preceding the decree; exemption follows only from the date on which the decree takes effect.

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