JUDGMENT P. Krishna, J.
1. The Income Tax Appellate Tribunal has referred the following question of law under Section 26(2) of the Gift Tax Act, 1961 (hereinafter referred to as the Act) for opinion to this Court:-
"Whether on the facts and the circumstances of the case the Tribunal is justified in holding that a taxable gift was made by the assessee during the accounting period corresponding to the assessment year 1979-80."
2. Since the facts of the case of Smt. Ram Dulari Agrawal are identical to the facts of the case of Shri Brij Prasad Agrawal, (as stated by the Tribunal in the statement of case) we are noticing the relevant facts of the case of Smt. Ram Dulari Agrawal only. The assessee, the donor, is an individual. Her accounting period for the assessment year 1979-80 ended on 24.10.1978.
3. The assessee, Smt. Ram Dulari Agrawal by an oral declaration created a Trust on 8th of April, 1977 known as Bee Kay Family Trust for the benefit of M/s. Eskay Paper Industries Pvt. Limited. Smt. Ram Dulari, the settler, transferred the gold ornaments weighing 5,261 grams to the trustees to be held in trust in accordance with the provisions earlier declared by her. Shri Padam Chand Kanodia and Shri Brijendra Kumar Agrawal were appointed as Trustee. The assessee, while transferring the ornaments to the Trust, expressly reserved her absolute rights and power to forego the said trust completely at any time she chose in her absolute discretion and to retransfer the said ornaments or other assets into which they were converted back to her for her absolute benefits. In exercise of the aforesaid power the assessee on 2nd of April, 1978 relevant to the assessment year 1979-80 executed a memorandum whereby she expressly and irrevocably renounced, released, disclaimed, surrendered, relinquished the claimed into or upon the said right of revocation reserved by her under or by declaration made by her on 8th of April 1977. On these facts the Gift Tax Officer held that surrender of power of revocation factually resulted in transfer of ownership of gift and therefore directed the levy of a gift tax in terms of Section 2 (xii) read with Section 4 (i) (c) of the Gift Tax Act (hereinafter referred to as the Act). The said order has been confirmed by the authorities below including the Tribunal.
4. Heard Shri Krishna Agrawal, learned Advocate, holding brief of Shri R.R. Kapoor Advocate for the assessee and Shri Shambhu Chopra, the learned counsel for the department.
5. The learned counsel for the assessee submitted that the gift in question was not made in the relevant assessment year i.e. 1979-80 but it was made during the assessment year 1978-79 and therefore the Gift Tax Officer was not right in taxing the gift in the assessment year in question (1979-80). Elaborating the argument it was submitted that release or surrender of right of the assessee to retransfer the said ornaments or other assets into which they were reverted back to her for her own absolute benefits on 8th April 1977 was a unilateral act and a gift can be made only through bilateral act. It was further submitted that on plain reading of Section 2 (xxiv) which defines "transfer of property" it is not a case of disposition, conveyance, assignment etc. and therefore is beyond the ambit of the "gift" as defined in Section 2 (xii) of the Act. Reliance was placed by him on Commissioner of Gift Tax v. Smt. Ansuiyan Sarabhai (1982) 133 ITR 108 which has been confirmed by the Supreme Court in (1999), 239 ITR 262 Commissioner of Gift Tax v. Smt. Ansuiyan Sarabha. In contra, the learned standing counsel placed reliance upon the order passed by the Tribunal in the present case.
6. Section 2 (xii) of the Act defines "Gift" as under :-
" "gift" means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money's worth, and includes the transfer or conversion of any property referred to in Section 4, deemed to be a gift under that section.
Explanation - A transfer of any building or part thereof referred to in Clause (iii), Clause (iiia) or Clause (iiib) of Section 27 of the Income-tax Act by the person who is deemed under the said clause to be the owner thereof made voluntarily and without consideration in money or money's worth, shall be deemed to be a gift made by such person."
"Transfer of property" is defined Under Section 2 (xxiv), which reads as under :
" 'transfer of property' means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes -
(a) the creation of a trust in property;
(b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property ;
(c) the exercise of a power of appointment (whether general, special or subject to any restrictions as to the persons in whose favour the appointment may be made) of property vested in any person, not the owner of the property, to determine its disposition in favour of any person other than the donee of the power ; and
(d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person."
7. Under Section 4 of the Act certain transfers have been included in "gifts".
For the purposes of the present case Clause- C of Section 4 (1) of the Act is relevant.
Section 4 "Gift" includes certain transfers -
"(1) for the purpose of this Act,
(a).................................
(b)................................
(c) Where there is a release, discharge, surrender, forfeiture, abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or the abandonment, to the extent to which it has not been found to the satisfaction of the Assessing Officer to have been bonafide, shall be deemed to be a gift made by the person responsible for the release, discharge, surrender, forfeiture or abandonment;
(d).....................................
(e) ....................................
(2)...................................
8. The case of the assessee is that she transferred ornaments in question on 8th of April, 1977, when oral Trust in respect thereof was created and therefore, the transfer of ornaments which may have been termed as gift, if at all took place in the assessment year 1978-79 and not in assessment year 1979-80 year and on the basis of such transfer no action under the Act could be taken for the year under consideration. It may be recalled that during the previous year under consideration i.e. on 2.4.1978 the assessee surrendered, relinquished her right of retransfer of the said ornaments. The learned counsel for the assessee submitted that the release or surrender of her right of retransfer being unilateral action of the assessee herself could not be taxed as gift. According to the donor it was not a transfer of property in the ornaments in question in the relevant assessment year.
9. The Gift Tax Officer found as a fact which has not been set aside by the Tribunal that the assessee on 8th of April, 1977 merely transferred the possession of the ornaments in question to the Trust. The Gift Tax Officer found that the gold was first settled in favour of M/s. Bee Kay Family Trust and beneficiary was M/s. Eskay Paper Industries Pvt. Ltd. At the first instance the settlement was revocable and no entries were passed in the books of M/s. Eskay Papers Industries Pvt. Limited. Subsequently when the assessee surrendered her right of revocation of the Trust, the beneficiary M/s. Eskay Papers Industries Pvt. Ltd. accounted for the gold settled in favour of the Trust by passing relevant entries in the relevant balance sheet. Thus the passing of entry in respect of the gold and accounting for the same in the balance sheet of the actual beneficiary is nothing but acceptance of the gold received by the Company. Therefore, under these circumstances the argument of the learned counsel for the assessee that it was a case of unilateral transaction was rightly repelled by the authorities below. We find that it is a clear case of donor and donee where two parties are involved and the acceptance of the gift is established through the balance sheet of the Company.
10. The "gift" as defined in the Act means the transfer by one person to another person of any existing moveable or immoveable property made voluntarily and without consideration, any money or moneys' worth. In the present case the handing over of the ornaments to the Trust under the declaration dated 8th of April, 1977 was revocable at any time at the mere will of the settler. The settler by means of the memorandum dated 2nd of April, 1978 irrevocably renounced, released or surrendered her right of revocation reserved by her under the declaration made by her on 8th of April 1977.
11. For the purpose of deciding whether valid gift under the Act has been made it is necessary to find out whether the donor has really divested herself of the property. The donor cannot be said to have transferred the property if, whilst ostensibly handing it over, he holds on to it by keeping unrestricted power to take it back the next minute. Section 6 (2) of the Act itself lays down a mode of valuation regard to gifts which are not revocable for a certain period, and taxes the donor only to the extent to which he has parted with the property. A transaction with an unlimited power of revocation, however becomes a gift under the Act when the donor dies without exercising his power of revocation, or during his life time gives up power of revocation for, thereafter there would be complete divesting of property which would be incapable of being recalled at any subsequent point of time, as held by the Bombay High Court in the case of Commissioner of Gift Tax. v. Dr. R.B. Kamdani (1974) 95 ITR 476.
12. The Gift Tax Officer has found that the declaration of Trust and surrender of power of revocation was not bonafide and the case is clearly covered by Section 4 (1) (c) of the Act. The assessee merely transferred the possession of the gold ornaments under the earlier oral declaration and there was no circumstances which would have prompted the assessee to have surrendered her right of revocation just within a year of declaration of Trust and settlement of gold. This was a device which was adopted by her just to reduce her tax liability and to evade the gift tax. It was a part of planned strategy to avoid the taxation. The authorities below have found that the revocation or surrender of right of retransfer by the assessee was not a bonafide action on her part. In this view of the matter we are of the opinion that it is a case governed by Section 4 (1) (c) of the Act Even if we accept the argument that it was only unilateral act, the finding being that the release, discharge, surrender or abandonment of the interest by the assessee by relinquishing her right of retransfer having not been found by the Gift Tax Officer to be bonafide, is deemed gift. The said finding is not under challenge, there being no reference on this issue. In such circumstances it has been held by the Bombay High Court in Commissioner of Gift Tax v. Dr. R.B. Kamdani (1974) 95 ITR 476 that irrevocability is essential feature of a gift in ordinary parlance, as well as under the substantive law relating to gifts contained in Section 126 of the Transfer of the Property Act. It may be clarified that Section 126 of the Transfer of Property Act would not in terms be applicable to a question that arises under the Gift Tax Act. The support can be had to the above proposition with the help of Section 6 of the Act. Section 6 (2) of the Act deals only with a situation in which there is complete divestment at least for a limited period and tolerates a gratuitous transfer which is revocable for a limited time within the concept of the gift under the Act.
13. However, much reliance was placed by the learned counsel for the assessee upon the judgment of Smt. Ansuiyan Sarabhai (Supra) of Gujrat High Court which has been confirmed by the Apex Court. A close reading of the facts of the above case do show that it is distinguishable on the facts as well as on question of law. In the case of Smt. Ansuiyan Sarabhai (supra) a Trust was created by her brother Shri Amba Lal Sarabhai whereby he transferred certain shares with a direction that income of the trust property should be given to the assessee Smt. Ansuiya Sarabhai, during her life time for her absolute use and benefit and after her death the Trustee had to transfer and assign the Trust property absolutely to the children and grand children of late Amba Lal Sarabhai in certain specified portion, as mentioned in the deed of settlement dated 30th August, 1949. For a number of years Smt. Ansuiya Sarabhai received the net income arising out of the Trust property as per deed of settlement. On 12th July 1964, Smt. Ansuiya Sarabhai out of natural love and affection, released, surrendered and yielded her right, title or interest for life in that net income of Trust property in favour of the said children and grand children of late Shri Amba Lal Sarabhai who were otherwise to get the said property after demise to Smt. Ansuiya. On the construction of the recitals of the release deed executed by Smt. Ansuiya Sarabhai, the High Court found that the release deed was a bonafide transaction and by executing release deed the effect of the release deed dated 12th July 1964 executed by Smt. Ansuiya Sarabhai by which she had surrendered and released her life interest in the portion of the Trust property enabled the sons and grandsons of the settler who were the beneficiaries to resume possession of the entire corpus of the property a little earlier. In other words the interest of beneficiaries in that portion of the property was accelerated. This transaction was held to be bonafide by the department. In this view of the matter the Supreme Court held that there is "no transaction" exigible to tax within the meaning of Gift Tax Act. Neither the facts of the case in hand are parallel nor the proposition of law raised in the case in hand was in issue in the case of Ansuiya Sarabhai (supra). The finding that the release deed executed by Smt. Ansuiya was bona fide, ipso facto excludes the operation of Section 4 (1) (c). As noted above, in the present case the finding of fact is otherwise. It has been found that the subsequent deed executed by the donor relinquishing her right of retransfer was not a bonafide act on her part. The learned counsel for the assessee could not give any satisfactory reply to the above distinction pointed out by us to him. Therefore, we are of the considered opinion that the Tribunal has taken correct view of law in its order and there is no illegality.
14. The sum and substance of the argument of the learned counsel for the assessee was that the gift, if any, was made in the preceding previous year and not in the accounting year relevant to the assessment year in question in as much as the ornaments were transferred to the Trust by the oral declaration dated 8th of April, 1977. It has been found that the donor had not really divested herself of the property; in face of retransfer clause, it was not a valid gift on 8.7.1977. Strictly speaking, that is not very relevant for the decision of the question referred to us in as much as the department proceeded to tax the transaction in question as gift on account of the event which took place on 2nd of April, 1978 when the assessee executed another memorandum whereby the settler (assessee) expressly and irrevocably renounced, released, disclaimed, surrendered, relinquished and quit her claim into or upon the right of revocation reserved by her by the declaration made by her on 8th of April, 1977. The real question is whether such revocation of right of transfer can be taxed under Section 4 (1) (c) of the Act. Evidently the surrender deed dated 2nd of April, 1978 is relevant to the assessment year in question i.e. 1979-80. On the facts of the present case the irresistible conclusion is that the execution of memorandum dated 2nd of April, 1978 by the assessee amounts to deemed gift within the meaning of Section 4 (1) (c) of the Act. The learned counsel for the assessee could not show us any thing to distract the nonapplicability of Section 4 (1) (c) of the Act.
15. In the result we answer the question of law referred to us in affirmative i.e. against the assessee and in favour of the department. However, there shall be no order as to costs.