A.K. MENON, J.

1. This Reference under Section 256(1) of the Income Tax Act, 1961 (the Act) by the Income Tax Appellate Tribunal (the Tribunal) seeks our opinion on the following question of law : -

“(i) Whether on the facts and circumstances of the case, the Tribunal was right in holding that the life interest held by the assessee in Neville Wadia Trust No. 2 was an asset coming within the purview of Sec. 49(1)(ii) as it was acquired on the release executed by the previous life interest holder which amounted to a gift and therefore, the cost of the acquisition of asset would be deemed to be the cost of the original settlor ?”

2. This Reference relates to the Assessment Year 1984-85. The brief facts leading to the present Reference as indicated in the statement of case are as under :

(a) By an indenture dated 30th January, 1947, Sir Nusserwanjee Nowrosjee Wadia (Sir Ness Wadia) created an irrevocable trust for the benefit of his son Neville Ness Wadia (Neville Wadia) and his children by settling 1001 fully paid shares of Bombay Dyeing and Manufacturing Co. on trustees of Neville Ness Trust Fund No. 2 (the Trust). The indenture of lease provided that Neville Wadia (son of the se