JUDGMENT

Dipak Kumar Sen, J.

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 Gift-tax 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 Section 11 of the Income-tax Act, 1961, the gift made to the said trust was exempt from gift-tax under Section 5(1)(v) of the Gift-tax Act. The Gift-tax Officer 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 Gift-tax Officer disallowed the exemption claimed by the assessee under Section 5(1)(v) of the Gift-tax Act.

3. Being aggrieved, the assessee preferred an appeal against the order of the Gift-tax Officer before the Appellate Assistant Commissioner. 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 Sections 11 and 80G of the Income-tax Act, 1961, by an order passed by the Income-tax Officer 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 Section 5(1)(v) of the Gift-tax Act had been satisfied. In support of his contentions, the assessee cited a decision of the Bombay High Court in CGT v. Yogendra N. Mafatlal [1965] 58 ITR 40. The Appellate Assistant Commissioner held that Section 5(1)(v) of the Gift-tax Act did hot 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 Section 80G of the Income-tax Act should apply in respect of such institutions or funds. The Appellate Assistant Commissioner 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.

4. Following the said decision of the Bombay High Court, the Appellate Assistant Commissioner 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.

5. Being aggrieved, the Revenue preferred an appeal before the Income-tax Appellate 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 Appellate Assistant Commissioner 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.

6. On an application of the Revenue under Section 26(1) of the Gift-tax 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 Section 5(1)(v) of the Gift-tax Act, 1958, in respect of Rs. 1,00,000 gifted to Lira Raja Sahayak Trust ?"

7. At the hearing, no one appeared on behalf of the assessee. Learned advocate for the Revenue in all fairness drew our attention to the said decision of the Bombay High Court in CGT v. Yogendra N. Mafatlal [1965] 58 ITR 40. The facts before the Bombay High Court were, inter alia, that one of the two assessees executed a trust deed on March 26, 1959, settling on trust five ordinary shares of a company owned by the assessee. The shares settled under the trust were to constitute the trust fund. The other assessee similarly executed a trust deed on June 21, 1958, settling 500 ordinary shares of a company on trust for the constitution and creation of a charitable trust fund. The second assessee also made another gift of 177 ordinary shares to the first trust subsequent to its creation on March 28, 1959.

8. In proceedings initiated under the Gift-tax Act, the Gift-tax Officer held that the assessees concerned were not entitled to exemption under Section 5(1)(v) of the Gift-tax Act as the initial gifts were not made to a fund established for a charitable purpose and as the same were made before the execution of the trust or the creation of the fund. The gifts having been made first and the fund having been created subsequently out of the gifts, the assessee was not entitled to exemption in respect of the initial gifts of shares.

9. On a reference, a Division Bench of the Bombay High Court held that under Section 5(1)(v) of the Gift-tax Act, 1958, even the initial gifts which were made for the purpose of starting or constituting a fund for charitable purposes would be entitled to exemption in the same manner in which subsequent gifts to the same fund would be exempt. Construing the said section, the Bombay High Court held that it should not be held that the Legislature did not intend to disentitle the founder of the fund from exemption while entitling others who donate to the fund subsequently. It was held further that a gift made to an institution or a fund at its very inception could be reasonably regarded as a gift made to a fund or an institution established for a charitable purpose within the meaning of the Gift-tax Act. There was nothing to restrict the language of Section 5(1)(v) of the Gift-tax Act so as to exclude gifts to an institution or a firm at its inception or commencement and the trust deeds themselves constituted funds in the sense that all donations would go to the trusts.

10. Learned advocate for the Revenue also drew our attention to a decision of Punjab High Court in CGT v. Lachhman Dass Oswal [1977] 106 ITR 742 and a decision of Gauhati High Court in CIT v. Ramniwas Karwa [1978] 112 ITR 433 where the decision of the Bombay High Court in Yogendra N. Mafatlal's case [1965] 58 ITR 40 was followed and applied.

11. In the facts found, we note that the gift of Rs. 1 lakh made by the assessee was not found to have been given for constituting the trust fund. The cheque dated August 27, 1963, was issued in the name of the trustees. On the same day, the trust came into existence. Therefore, it must be presumed that the gift was being given to and could only be accepted by an existing trust or an institution. We also note that the cheque was encashed in the bank account of the trust subsequently. These facts are sufficient to hold that the gift in question fell within the four corners of Section 5(1)(v) of the Gift-tax Act and was entitled to exemption. Even otherwise, the said gift should be entitled to exemption under Section 5(1)(v) of the Gift-tax Act on the authority of the decision of the Bombay High Court in Yogendra N. Mafatlal's case [1965] 58 ITR 40. No other High Court has taken a different view and we see no reason to do so.

12. For the reasons as above, we answer the question in the affirmative and in favour of the assessee.

13. There will be no order as to costs.

Monjula Bose, J.

14. I agree.