M.S.SHAH - (1.) At the instance of the assessee as well at the instance of the revenue, the following questions of law are referred to us for our decision in respect of the assessment year 1976-77 : At the instance of the assessee : (1) "Whether, on the facts and in the circumstances of the case, exercise of power of appointment by the assessee was a transfer of the assessee's interest in the property under Section 2(xxiv)(c) of the Gift-tax Act making the assessee liable to tax under the Gift-tax Act ?" (2) "If the answer to question No.1 is in the affirmative whether the assessee by exercising the power of appointment regarding his interest in the property and naming the persons to whom the trustees of the original trust should transfer the property at a future date became liable to gift-tax in this assessment year?" (3) "Whether the expression "in such manner" in clause (1)(iii) of the Trust Deed did not empower the trustees to make a direct transfer of 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 G.T.O. 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 gift-tax?"
(2.) 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 donee of the power there was a transfer which must have been 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 10/6/1985 which came to be clarified by the Tribunal in Misc.Civil Application filed by the assessee. We will refer to the said aspect when we will discuss question no.4 which is referred to us at the instance of the revenue.
(3.) Before dealing with the question nos. 1 to 3 referred to us at the instance of the assessee, it is necessary to set out the following clause in the trust deed dated 30/3/1960. "(iii) Notwithstanding anything hereinabove contained, the Trustees shall have 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 at any time or times after the date hereof and during the periods mentioned in this clause to and amongst the persons hereinafter mentioned or to anyone or more of them to the exclusion of others or other of them in such proportions and in such manner and at such time or times as the Trustees may in their absolute discretion think fit." (a) xxx xxx xxx (b) "From and after 1st January 1967 amongst Gira, Geeta, Vikram and Settlor's daughter Anarkali or the survivors or survivor of them" Bhartidevi Sarabhai (Settlor) settled the shares and investment as specified in Schedule being 10 shares in Karamchand Premchand Private Limited, 25 shares in Sarabhai Merck Private Limited and 2 shares in Cotton & Cloth Private Limited (ordinary shares), which were then valued at Rs.78,000.00. The trustees for the purpose and subject to the powers provided in the deed of settlement were given the discretion either to accumulate or pay the net income of the trust funds or any part or parts thereof at any time or times amongst the persons hereinafter referred to or to anyone or more of them. Different beneficiaries were specified for different period in clause (i). For the period from and after 1.1.1967 to 24.3.1978, beneficiaries were to be settlor's sister Gira and Gita and settlor's daughter Anarkali. After 25/3/1978, the beneficiaries were to be Gira and Gita, Anarkali and settlor's brother Vikram. Clause (b) reads as under : "(b) From and after 1st January 1967 amongst Gira, Geeta, Vikram and Settlor's daughter Anarkali or the survivors or survivor of them".;