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Report No. 67

Appendix 2

Points Concerning Gifts, Exchanges, Trusts, Etc. Under Section 4

(a) Conditional gifts

Though a gift is usually unconditional, it can be conditional. It is to be noted that a gift is a species of transfer, and is, therefore, subject to all the provisions of the law of transfer of property relating to conditional transfers. Like other transfers, a gift, therefore, may be subject to a condition precedent.1 If the condition is not invalid,2 the condition will be recognised by law. A gift to two sisters on the condition that they should live apart is valid.3 If A gives Rs. 500 to B on condition that B shall marry C, the condition is valid. But, if the condition is immoral or illegal, then it is void.4

Similarly, a gift may be subject to a condition subsequent.5 In a Madras case,6 a gift was made by a person sentenced to transportation for life to a relation, on the condition that the land gifted should be given back if the donor returned to his village.

In fact, section 126 of the Transfer of Property Act even provides that the donor and donee may agree that on the happening of any specified event not depending on the will of the donor, a gift shall be suspended or revoked. A condition can, therefore, even go to the extent of providing for revocation. Apart from the Transfer of Property Act, conditions are recognised in respect of gifts by Muslim law also.7-8

Though the Transfer of Property Act, section 123, dealing with the acceptance of a gift, does not require the acceptance to be in writing, and though the acceptance can be inferred or oral, there can be a written acceptance by the donee, and, in case of conditional gifts, it is prudent to have a written acceptance.

A gift to which a condition is attached is not a "sale", because, as defined in the Transfer of Property Act,9 a "sale" must be only for a price, and "price" here means money only.10 It has been specifically held11 that a transaction which is in consideration of the transferor's regard for the transferee, who agreed to maintain the transferor, is not a "sale".

Even if conditional gifts are not regarded as gifts, they are certainly not "sales". So they do not, at present, get the benefit of section 4, Stamp Act, which is confined to sales, mortgages and settlements.

1. Section 21, Transfer of Property Act.

2. Section 25, Transfer of Property Act; see particularly illustration (b).

3. Rodgmary v. Woodhouse, (1844) 7 Beav 437: 49 ER 1134; cited in Mulla Transfer of Property Act (1966), p. 782, footnote (Z).

4. Ram Szvarup v. Bela, 1884 ILR 6 All 313.

5. Section 31, Transfer of Property Act.

6. Venkataraman v. Ayyaszvamy, AIR 1923 Mad 67: 43 Mad Li 340.

7. Tyabji Muslim Law, (1958), p. 305, p. 366, illustration (1), and p. 406, illustration (1) and cases there cited.

8. Also the leading case of Nazvab Umjad Ally Khan, 11 MIA 517 (543, 547), as explained in AIR 1922 PC 281.

9. Section 54, Transfer of Property Act.

10. Madan Pillai v. Bhadrakali, AIR 1922 Mad 311.

11. Rati Ram v. Mam Chand, AIR 1959 Punj 117; (Case relating to right of pre-emption).

(b) Two documents constituting a gift

If there are two documents relating to a transaction of gift, the case does not, at present fall under section, unless the document is a "settlement". In an Allahabad case,1 T, in consideration of love and affection and the promise to be maintained by his brother M, executed a deed of gift of all his property in favour of M, and M executed another deed whereby M promised that during the life time of T he would pay T's expenses. The High Court held that the second deed executed by M was one which came within section 4, because the transaction may fairly be said to come within "settlement". As to the unity of the transaction, the Court observed that the two instrument were intended by the parties to be employed in completing one transaction. In that case, the Court held the transaction to be one of settlement (no detailed reasons are given discussing this aspect of the matter).

If, however, the parties had not been brothers, the document would not be regarded as a settlement, and the transaction would be substantially one of gift,-but not covered by section 4. The case is referred to here to show how section 4 could be usefully extended to gifts. In a Bombay case,2 the document marked A was a document on a three rupees stamp paper, and was one of conveyance of immovable property absolutely for Rs. 275. On the same deed of sale, the individual nephew of the executant endorsed his consent to the sale. It was held that the endorsement of consent and the conveyance were several instruments employed to complete a transaction within section 6 of the Act of 1879 (present section 4), and the consent ought to have been written on a separate stamp paper of the value of one rupee. This case is cited here to show how, in reality, the situation could arise in relation to gifts also, namely, where A executes a gift and B, who is his undivided nephew, indicates his consent. At present, the case could be outside section 4, but the transaction of gift is but one, and it is fair that there should be only one duty.

1. Stamp reference, 1915 ILR 37 All 264 (FB).

2. Hanumappa, 1888 ILR 13 Born 281.

(c) Trusts

Then, there is the case of trusts, the machinery of trust can be employed to effect a transfer for the benefit of certain persons who are not related to the author of the trust. The Trust Act does not require that there should be only one physical instrument of trust. The case would be outside present section 4, but ought to be covered by it, there being no reason why double duty should be charged on two deeds of trust and not on two deeds of settlement.

(d) Exchange

There is also the case of exchange. When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an exchange.1 A transfer of property in completion of an exchange can be made only in the manner provided for the transfer of such property by sale.2 This is what the Transfer of Property At provides. But this provision does not necessarily attract the beneficial provisions of section 4 of the Stamp Act. It merely deals with the rules as to registration etc.

1. Section 118, Transfer of Property Act.

2. Section 118, Transfer of Property Act.

(e) Partnership

Then, there are also cases of partnership, where the stamp duty is higher than in case of an ordinary agreement.



Indian Stamp Act, 1899 Back




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