COMMISSIONER OF GIFT TAX Vs. YOGENDRA N MAFATLAL

JUDGEMENT

(1.) THE assessees concerned in this reference had executed trust deeds constituting charitable fund in respect of certain shares possessed by them. The question which arises for consideration is:

(2.) ONE of the two assessees had executed a trust deed on the 26th of March, 1959, settling on trust 5 ordinary shares of the Mafatlal Gagalbhai & Co. Pvt. Ltd., possessed by him. The trust was for the creation of a trust called "Shri Yogendra Navinchandra Mafatlal and Smt. Madhuri Yogendra Mafatlal Trust", and the shares settled under this trust were to constitute the trust fund. In the preamble of the trust deed it was stated :

(3.) MR . Joshi, the learned counsel who appears for the Department, has argued that a gift, which is entitled to exemption under S. 5(1)(v), must be a gift to a fund for a charitable purpose, which is already established and in existence at the point of time when the gift is made. It must be a gift to a fund and, therefore, the fund must be already there to receive it. A gift, which is made not to a fund already existing, but which by the gift itself is brought into existence, cannot be said to be a gift to a fund and would not, therefore, qualify for the exemption under S. 5(1)(v) of the GT Act. He points out that the scheme of the GT Act allowing exemption from tax in respect of gifts and donations made out of property of the assessee for charitable purposes is the same as under the IT Act for exemption of income -tax for donations and gifts of income made for such purposes. Even under the Indian IT Act, donations and gifts of incomes made for charitable purposes or for the purpose of founding charities or charitable purposes are not exempted. It is only gifts or donations, which are made to institutions or funds, which satisfy the requirements of S. 15B of the Indian IT Act that are exempted. The same is the position under the GT Act and it is only gifts or donations, which are made to institutions or funds to which the provisions of S. 15B of the IT Act apply that are permitted exemption from gift -tax. An examination of the provisions of the trust deeds in the present case will show, says Mr. Joshi, that the shares settled under the said trust deeds constitute or create the charitable trust fund and are not gifts made to a charitable fund. According to Mr. Joshi, therefore, the AAC and the Tribunal have erred in allowing exemption to the assessee in respect of the value of the shares transferred by them under their respective trust deeds.