Satish Chandra, J.
1. On 9th June, 1957, Maharaja Pateshwari Prasad Singh of Balrampur settled a large number of properties on trust in consideration of natural love and affection which the Maharaja had towards his wife, Maharani Raj Lakshmi, and to effectuate his desire of settling immovable properties and securities, etc., to ensure that the said Maharani may lead comfortable life befitting her dignity and status. The trustees were the Maharaja himself, the Maharani aforesaid and Shri J.K. Munshi. The trustees were charged with the obligation of paying taxes and other dues, etc., out of the trust assets and to pay the balance of the income of the trust assets to the said Maharani Raj Lakshmi for and during her lifetime. After her death the assets of the trust were to revert to the Maharaja if he was alive or to the charitable trust mentioned in the document. The properties and securities mentioned in the trust deed were valued at Rs. 20,31,500.
2. In proceedings under the Gift-tax Act for the assessment year 1958-59, the Gift-tax Officer valued the properties involved in the trust at Rs. 22,52,553. He granted an exemption of Rs. 10,000 under Section 5(2) of the Act and brought the value of the remaining property to tax.
3. On appeal, the Appellate Assistant Commissioner of Income-tax gave some relief. The Maharani took the dispute to the Tribunal. The Tribunal held that the provisions of Section 5(1)(viii) of the Gift-tax Act had been ignored by the departmental officers as the gift in this case was in favour of the assessee's wife. A sum of Rs. 1,00,000 would, in any case, be exempt from taxation. In this view, the Gift-tax Officer was directed to modify the assessment accordingly.
4. At the instance of the department the Tribunal has referred the following question of law for opinion of this court.
' Whether, on the facts and in the circumstances of the case, the assessee was entitled to exemption of Rs. 1,00,000 '
5. Precisely the same question arose before the Bombay High Court in Commissioner of Gift-tax v. G.G. Morarji : [1965]58ITR505(Bom) . The Bench of the Bombay High Court observed:
'And this brings us to the relevant provisions of the Gift-tax Act. This Act has been enacted in the year 1958 by Parliament to provide for levy of gift-tax. The charging section is Section 3 and it provides: ' 3. Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the 1st day of April, 1958, a tax (hereinafter referred to as gift-tax) in respect of the gifts, if any, made by a person during the previous year (other than gifts made before the 1st day of April, 1957), at the rate or rates specified in the Schedule.'
6. Under the charging section, thus, gifts made after the 1st April, 1957, are chargeable to tax under Section 3 subject to the other provisions contained in the Act. The charge is on the person making the gift in respect of the gifts made by him. Sect-ion 5 provides that gift-tax shall not be charged under this Act in respect of certain gifts described in Clauses (i) to (xvi) of Sub-section (1) thereof. The material clause, viz, Clause (viii), as it stood at the material time, reads :
' (viii) to his or her spouse, subject to a maximum of rupees one lakh in value in the aggregate in one or more previous years.....'
7. The question to be considered is whether, by settling the interest and income of the trust fund of Rs. 1 lakh on his wife, Indumati, during her lifetime, the assessee had made any gift to his wife. If there is any such gift in the said settlement, the assessee would be entitled to exemption under Section 5(1)(viii) of the Act. If, on the other hand, therein no gift is involved to his wife, the assessee is not entitled to any exemption. Gift has been denned in Section 2, which is the interpretation clause. Clause (xii) defines a 'gift' and it provides :
' ' 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 of any property deemed to be a gift under Section 4.'
8. It is not necessary for the purposes of this case to refer to Section 4 which deals with the deemed gifts. Now, the essence of gift thus is a voluntary transfer of existing movable or immovable property by one person to another without consideration in money or money's worth. Property has been defined in Clause (xxii) as :
'' Property ' includes any interest in property, movable or immovable.'
9. Clause (xxiv) denning ' transfer of property ', inter alia, provides:
'(xxiv) '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 . . . .'
10. It is not necessary to read the other sub-clauses of Clause (xxiv) Reading these three Clauses--(xii), (xxii) and (xxiv)--together, it is clear that interest in property is itself property, and grant of interest in property by one to another would be a transfer of property within the meaning of the Act. On reading these three clauses together, it would necessarily follow that when a person voluntarily grants interest in property to another without consideration in money or money's worth, it would amount to a gift within the meaning of the Act. Mr. Joshi also referred us to the definition of ' donee ' which provides: '' Donee ' means any person who acquires any property under a gift, and, where a gift is made to a trustee for the benefit of another person, includes both the trustee and the beneficiary.' It is his argument that, under the settlement, the property transferred is a sum of Rs. 1 lakh. The said property has been transferred by the assessee to the trustees. The trustees are the donees of the property. The wife of the assessee has acquired no interest in the trust property. There is, therefore, no gift involved by the assessee to his wife. It is not possible to accept the argument of Mr. Joshi. It is indeed true that the legal title to the trust fund has been transferred by the assessee to the trustees. But that has not the effect of creating no interest in trust property in favour of his wife who is the beneficiary under the settlement A 'trust' is defined in Section 3 of the Indian Trusts Act, and reading the section, it becomes clear that though the legal title in the trust property vests in the trustees, what he gets under the trust by accepting the trust is only an obligation annexed to the trust property arising out of the confidence placed in him by the settlor. He has to carry out these obligations which he has accepted in accordance with the directions given to him by the settlor under the settlement for the benefit of other persons. The persons for whose benefit the trustee discharges these obligations are termed as the beneficiaries, and the interest of the beneficiary under the settlement is termed in Section 3 as the 'beneficial interest'. The subject-matter of the trust is called 'trust property'. The nature of the beneficial interest or the interest of the beneficiary has been described in Section 3 as ' his (beneficiary's) right against the trustee as owner of the trust property'. The argument of Mr. Joshi is that what a beneficiary gets under the settlement is only a right against the trustee and not any interest in the trust fund. Now, reading Section 3 as a whole, it is dear that the right which the beneficiary gets against the trustee is not a right in air. It is a right in respect of the property which is called the trust property. The right of the beneficiary against the trustee in respect of trust property is called beneficial interest. It is in law termed as equitable title to the property. It is not possible to hold that the right which a beneficiary gets under the trust is not an interest in the trust property. The fundamental attribute of ownership of property is power or right of transfer and right to possess and enjoy property and/or its income. The trustee has no power to transfer trust property for his benefit, nor can he enjoy the trust property for his benefit. He, undoubtedly, possesses the trust property but the possession is for the benefit of others, the beneficiaries. . The trust thus is merely a means or a vehicle by which a donor passes on his interest in the trust property to the beneficiaries. . In effect, a trust is a gift of trust property or an interest therein to the beneficiaries. Mr. Joshi, however, contends that that may be the position under the Trusts Act, but, by reason of the definition of 'transfer of. property' contained in Clause (xxiv), such is not the position under the Gift-tax Act. Sub-clause (a) of Clause (xxiv) provides that the creation of a trust is transfer of property. A transfer of property is complete when the trust is created. It is not open then to travel to sub- Clause (b) of Clause (xxiv) to see whether by making a trust an interest in the property has also been created by the author of the trust in favour of the beneficiaries. We see nothing in the language used in Clause (xxiv) so as to restrict the operation and legal effect of creation of a trust in favour of the beneficiaries. To accept the contention of Mr. Joshi would lead to unforeseen results. It would virtually amount to denial of the benefit which the legislature by enacting Section 5 have conferred on a donor. It would mean that the gifts, which fall within sections, would fall out of Section 5 if made through the instrumentality of a trust. Various types of gifts are, to the extent stated therein, exempted from tax. To illustrate, Clause (vii) provides : 'any relative dependent upon him for support and maintenance...' The section contemplates that a person, who by making a gift of his property makes a provision for support and maintenance of a relative dependent on him, should get certain exemptions from liability to pay tax. A person, who has to provide for maintenance of his minor children, if the construction is accepted, would have to make it otherwise than by trust or settlement. In certain cases, assuming that there are minor children, it would not be possible even to make provision for support and maintenance of these minor children without making a trust. On the construction, a person if he does make provision for support and maintenance of his minor children by creating a trust, invites a liability to tax. Such illustrations could be multiplied by referring to certain other clauses of Section 5, e.g., (iv), (v), (xii), etc. There is no warrant to assumesuch an intention on the part of the legislature, specially when making a trust has been taken to be a mode of 'transfer of property'. In our opinion, therefore, by creating a settlement of date December 22, 1958, the assessee has transferred interest in the trust fund to his wife. There is no dispute that the settlement has been voluntarily made, and there is no consideration in money or money's worth. It would, therefore, be a gift of an interest in the trust property, namely, the trust fund, which was in existence at the time of making of the transfer. Mr. Joshi, however, contends that even if, on the view we have taken, it is a gift, it is not a gift falling under Clause (viii) of Section 5(1). According to him, in order to bring a gift under the said Clause (viii), it must be established that the spouse has a disposing power over the property gifted to him or her. Reliance in support of this- argument is placed on Sub-section (3) of Section 5. Subsection (3) provides that: ' Notwithstanding anything contained in Sub-section (1) or Sub-section (2), where either spouse makes any gifts out of any such gifts received by that spouse as fall within Clause (viii) of Sub-section (1), the gifts so made shall be deemed to be taxable gifts, made by that spouss and nothing contained in Sub-section (1) or Sub-section (2) shall apply in relation to any such gifts.' It is difficult to read the said Sub-section as limiting the operation of Clause (viii) of Section 5(1), or as a proviso to Clause (viii) taking out of it certain gifts which fairly fall under Clause (viii). Sub-section (3) is an independent provision. All that has been stated in this sub-section is that: a spouse after getting a property by way of gift, if makes another gift of the same property, would not be entitled to get any exemption provided for either in Sub-section (1) or Sub-section (2) of Section 5. That does not mean that for a gift to fall under Clause (8), it must be one in respect of which the donor's spouse should necessarily have capacity to dispose it of.'
11. It was then held that the assessee was entitled to an exemption under Section 5(1)(viii) to the extent of the value of the gift involved in the settlement of his spouse. We are in entire agreement with the view expressed by the Bombay High Court. In our opinion the assessee was entitled to an exemption to the extent of the value of the gift involved in the settlement in her. Learned counsel for the department did not question the position that in view of the value of the property involved in the trust being Rs. 22,52,553 the net value of the interest given to the lady would in any case be at least Rs. 1,00,000,
12. We, accordingly, answer the question referred to us in the affirmative, in favour of the assessee and against the department. The assessee will be entitled to costs, which we assess at Rs. 200.