- (1.) : Lira Raja of Calcutta, since deceased and now represented by Purushottam Lira Raja, his legal representative, the assessee, during his lifetime made a gift of Rs. 1 lakh to Purushottam L. Raja and others, trustees of Lira Raja Sahayak Trust by a cheque dated August 27, 1963. The said trust was also created on the same day, that is August 27, 1963.
(2.) PROCEEDINGS under the GT Act, 1958, were initiated against Lira Raja, the assessee. In the proceedings, the assessee contended that as Lira Raja Sahayak Trust was a charitable trust whose income was exempt from income-tax under s. 11 of the IT Act, 1961, the gift made to the said trust was exempt from GT under s. 5(1)(v) of the GT Act. The GTO did not accept the contention of the assessee and held that the gift was made first and the trust fund was created subsequently out of the gift and, therefore, the assessee was not entitled to the exemption claimed. He held that only where a gift has been made to an existing charitable fund or institution, the question of exemption from gift-tax would arise. The GTO disallowed the exemption claimed by the assessee under s. 5(1)(v) of the GT Act. Being aggrieved, the assessee preferred an appeal against the order of the GTO before the AAC. It was contended on behalf of the assessee in the appeal that the trust to which the gift had been made was exempt from income-tax under ss. 11 and 80G of the IT Act, 1961, by an order passed by the ITO (on September 18, 1967. It was contended that the donation had been made to a trust which was charitable in nature and all the conditions and requisites of s. 5(1)(v) of the GT Act had been satisfied. In support of his contentions, the assessee cited a decision of the Bombay High Court in CGT vs. Yogendra N. Mafatlal (1965) 58 ITR 40 (Bom). The AAC held that s. 5(1)(v) of the GT Act did not specify the time within which the gift had to be made for the constitution of the trust fund in order to claim the benefit of the section. The only requirement was that the institution or the fund should be established or be deemed to be established for charitable purpose and that the provisions of s. 80G of the IT Act should apply in respect of such institutions or funds. The AAC noted that the trust in the instant case was established on August 27, 1963, for a charitable purpose and that the cheque made over to the trustees of the trust was credited to the bank account of the trust subsequently on September 23, 1963. Following the said decision of the Bombay High Court, the AAC held that initial gifts made to the trust were also entitled to exemption. He held further that, in any event, the gift in the instant case was made subsequently in the account of the trust. The appeal of the assessee was allowed and the said amount of Rs. 1 lakh was directed to be excluded in computing the gift-tax to be paid by the assessee.
(3.) BEING aggrieved, the Revenue preferred an appeal before the Tribunal. The contentions of the parties made in the proceedings below were reiterated before the Tribunal. The Tribunal considered the said decision of the Bombay High Court and upheld the order of the AAC holding that the said Rs. 1 lakh should not be included in the gift-tax assessment of the assessee. The Tribunal noted that the gift which was made by way of a cheque was actually encashed on September 23, 1963, but did not record any finding on the same. On an application of the Revenue under s. 26(1) of the GT Act, 1958, the following question has been referred, as a question of law arising out of the order of the Tribunal, for the opinion of this Court: " Whether, on the facts and in the circumstances of the case, the assessee is entitled to exemption under s. 5(1)(v) of the GT Act, 1958, in respect of Rs. 1,00,000 gifted to Lira Raja Sahayak Trust ? ";