TaxTMI 
TaxTMI 
2001 (9) TMI 11
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....n clause (1)(iii) of the trust deed did not empower the trustees to make a direct transfer to appointee trusts? If it did so empower, whether there had been such a direct transfer for which no tax is leviable as it had already been paid at the time of the first transfer?" At the instance of the Revenue: "(4) Whether, the Appellate Tribunal has been right in law in holding that the Gift-tax Officer was not justified in levying gift-tax on the value of the entire corpus on the ground that it was only the' assessee's interest in the property which was transferred and it was that which was required to be considered for the purpose of the gift-tax?" In second appeal before the Tribunal, the Tribunal held that since the power of appointment had been exercised in favour of a person other than the donee of the power there was a transfer which must have taken place in the accounting year when the power was exercised. On the question of valuation of the gift there was some ambiguity in the order dated June 10, 1985, which came to be clarified by the Tribunal in the miscellaneous civil application filed by the assessee. We will refer to the said aspect when we discuss question No. 4 which ....
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....tees shall pay the net income of the slice A of the trust funds arising or accruing during the period from 1st April, 1976, and up to and including 31st March, 1978, to Anarkali Sarabhai for her absolute use and benefit and the trustees shall subject to the interest of the said Anarkali Sarabhai and Gira Sarabhai in the net income of the slice A of the trust funds in terms of paragraphs 1(a) and (b) hereof hold with effect from 1st April, 2001, or up to the death of the last survivor of Gira Sarabhai, Geeta Mayor and Anarkali Sarabhai whichever date is earlier the corpus of the slice A of the trust funds for such person or persons including the said Anarkali Sarabhai and for such object or objects, purpose or purposes either absolutely or in trust or trusts, and upon such terms and conditions including grant of further power of appointment as the said Anarkali Sarabhai may by deed or deeds appoint at any time before 1st April, 2001, without transgressing the provisions of sections 13 and 14 of the Transfer of Property Act provided however that the trustees shall have full power and absolute authority to direct that the power of appointment exercised by the said Anarkali Sarabhai sh....
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....ection 2(xxiv) of the Act. It was further contended that this provision came to be interpreted by the Bombay High Court in CGT v. Mrs. Jer Mavis Lubimoff [1978] 114 ITR 90 and that as interpreted by the Bombay High Court the scope of power has to be considered for ascertaining whether any transfer has taken place. Alternatively, it is contended that the legislative amendment to the definition of "transfer of property" applied prospectively with effect from April 1, 1980, as has been stated in Circular No. 281, dated September 22, 1980. Hence, the tax authorities could not have applied the amended definition of transfer of property to the transaction in question which had taken place in the year relevant to the assessment year 1976-77. On the other hand, Mr. B.B. Nayak, learned counsel for the Revenue, has submitted that the transactions in question clearly fell within the definition of "transfer of property". The power of appointment was exercised by Anarkali in favour of certain other trusts which were not beneficiaries covered by the original deed of settlement dated March 30, 1960. Hence, the transfer of property/corpus of the trust either by the trustees or by Anarkali in the g....
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....ection 2(13) of the Estate Duty Act, 1953, defines that expression as under: 'Power to appoint property' means power to determine the disposition of property of which the person invested with the power is not the owner.' That this is the correct meaning of that expression is also evident from Halsbury's Laws of England, volume 30, third edition, paragraph 367, wherein it is, inter alia, stated that dispositive powers, more commonly known as powers of appointment, are powers authorising a person to create or dispose of beneficial interests in property. Such powers are usually sub-divided into general powers and special powers. Paragraph 368 provides that a general power is a power that the donee can exercise in favour of such person or persons as he pleases, including himself or his executors and administrators. A special power can be exercised only in favour of certain specified persons or classes such as children or relations and friends of the donee..." The contention before the Bombay High Court was that the word "general" was not used before the expression "power of appointment" and that therefore exercise of all powers of appointment would fall within section 2(xxiv). It wa....
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...."...no gift-tax was attracted in a case where a beneficiary of a trust exercised the power of appointment conferred on him under the trust deed and released his or her life interest in the trust in favour of other persons." It is vehemently submitted by Mr. Patel that the Revenue itself interpreted the judgment of the Bombay High Court in the case of CGT v. Mrs. Jer Mavis Lubimoff [1978] 114 ITR 90 to mean that no gift-tax was attracted in a case where a beneficiary of a trust exercised the power of appointment conferred on him under the trust deed and released his or her life interest in the trust in favour of other persons. Mr. Patel submitted that the Revenue did not make any distinction between the general power of appointment or special power of appointment and therefore even if the power of appointment in the instant case is held to be a general power of appointment, the pre-amendment provision of section 2(xxiv) was not attracted as the power of appointment was not exercised in favour of the donee of the power herself. We are afraid, this argument cannot be accepted. The circular in question merely purported to draw the conclusion from the judgment of the Bombay High Court....
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....rpus of the trust property and in exercise of power conferred upon her on March 31, 1976 exercised the power in favour of four other trusts of which Anarkali was the settlor which resulted in transfer of the property which she held by virtue of the trust deed coupled with the resolution dated January 24, 1976. Hence, no fault can be found with the decision of the Tribunal holding that the transfer of property did take place in the year ended March 31, 1976 relevant to the assessment year 1976-77. As far as question No. (3) is concerned learned counsel submitted that since clauses (i) and (iii) of the trust deed conferred full power and absolute authority to divide, distribute, hand over and transfer absolutely the corpus of the trust funds or any part or parts thereof amongst the beneficiaries of the trust or to anyone it was open to the trustee to transfer the corpus of the trust in favour of the four trusts in question which was settled by Anarkali and that therefore there was no transfer of property exigible to the Gift-tax Act and that since the gift-tax was already paid at the time when the trust was settled in March, 1960, there was no obligation to pay gift-tax twice over w....