- (1.)THIS appeal is directed against the order of the Income Tax Appellate tribunal dated 8. 4. 2005 made in I. T. A. No. 4/mds/98 for the assessment year 1985-86 raising the following substantial question of law:
"whether on the facts and in the circumstancess of the case, the income-tax Appellate Tribunal was right in law in holding that, the assessee trust was exempt under the provisions of Section 45 (e) of the Gift-tax Act, even though the Civil Court has no power to make amendments or alter the objects of the Trust Deed under Section 92 of the Civil Procedure Code?"

(2.)THE brief facts of the case are as follows:
The original gift tax assessment made on the assessee for the assessment year 1985-86 exempting the gift of Rs. 89,615/- made by the assessee trust under Section 45 (e) of the Gift Tax Act (hereinafter referred to as the act) was set aside by the Commissioner of Gift Tax under Section 24 (2) of the act by an order dated 6. 2. 1992 with a direction to compute the taxable gift accordingly. The trust was denied exemption under Section 11 of the Income Tax Act for various years taking notice of certain offending clauses in the trust deed dated 25. 6. 1968 , which necessitated the assessee trust to move the civil Court under Section 92 of the Civil Procedure Code where the trust got a declaratory decree dated 29. 4. 1981, where under the said offending clauses were got deleted with effect from 25. 6. 1968. But still the Revenue did not grant exemption.

(1 ). Concededly, when the matter came up for consideration before this Court for the assessment year 1976-77, this Court also denied exemption on the ground that the Civil Court could not make a deletion of the offending clauses of the gift deed dated 25. 6. 1968 with retrospective effect, as a result, the Assessing Officer did not allow exemption under Section 45 (e) of the Act for the assessment year 1985-86 by his assessment order 28. 2. 1994.

(2 ). Aggrieved by the said order of the Assessing Officer refusing to grant exemption under Section 45 (e) of the Act for the assessment year 1985-86, the assessee preferred an appeal before the Commissioner of Gift Tax (Appeals) by relying on a decision in the case of CIT V. Kamala Town Trust reported in 217 ITR 699. But the Commissioner of Gift Tax (Appeals) dismissed the appeal holding that the amendment had only prospective effect and not retrospective effect. Hence, the assessee filed further appeal before the income Tax Appellate Tribunal. Before the Tribunal also, the assessee referred the decision of the Apex Court in the case of CIT V. Kamala Town trust reported in 217 ITR 699. The Tribunal, following its own order in ITA nos. 3838 and 3839/mds/89, in the assessee's own case, allowed the appeal. Hence the present appeal by the Revenue.

(3.)IN this regard, it is apt to refer the decision of the Apex Court in the case of CIT V. Kamala Town Trust reported in 217 ITR 699, where under the Apex Court has held that since the decree was passed by the Civil Court permitting rectification of the trust deed, the same would have only prospective operation and would not affect the assessment year in question of the charitable trust and the income of the trust was not entitled to exemption under Sections 11 and 12 of the Income Tax Act for the assessment years prior to the date of the decree.