Case Note & Summary
The Revenue appealed against the order of the Income Tax Appellate Tribunal which confirmed the Deputy Commissioner of Income Tax (Appeals)'s order holding that Respondent No.1 (assessee) was not liable to pay gift tax and her case was exempted under Section 5(1)(ii) of the Gift Tax Act, 1957. The assessee, a non-resident of India, made gifts of Rs.1,58,000 each to five trusts in Kashmir on 2nd November 1982. The funds for these gifts were transferred from Goa to Kashmir via a demand draft. The Revenue contended that the gifts were not exempt because the money was transferred from within India. The Court framed the substantial question of law: whether gifts made in Kashmir by a non-resident assessee out of money transferred from other part of the country are exempt under the Gift Tax Act. The Court analyzed Section 5(1)(ii) which exempts gifts of money made outside India. It held that the situs of the gift is where the gift is made, not where the money originates. Since the gifts were made in Kashmir, which is outside India for the purposes of the Act, they fall within the exemption. The Court dismissed the appeal, affirming the Tribunal's order.
Headnote
A) Gift Tax - Exemption under Section 5(1)(ii) - Gifts of Money Made Outside India - The issue was whether gifts made by a non-resident assessee in Kashmir, using funds transferred from another part of India, are exempt from gift tax under Section 5(1)(ii) of the Gift Tax Act, 1957. The Court held that the gifts were made in Kashmir, which is outside India for the purpose of the Act, and the money was transferred from other parts of India, but the situs of the gift is where the gift is made. Since the gifts were made in Kashmir, they are exempt under Section 5(1)(ii) as gifts of money made outside India. (Paras 1-5)
Issue of Consideration
Whether gifts made in Kashmir by the Assessee, a Non-Resident of India, out of money transferred from other part of the country, are exempted from tax under the Gift Tax Act, 1957?
Final Decision
The appeal is dismissed. The order of the Income Tax Appellate Tribunal is confirmed. No order as to costs.
Law Points
- Gift Tax Act
- 1957
- Section 5(1)(ii) exemption
- gifts of money made outside India
- non-resident assessee
- situs of gift
- transfer of funds within India
Case Details
2005 LawText (BOM) (08) 151
TAX APPEAL NO. 60 OF 2002
S. S. PARKAR, V. M. KANADE
Mr. S. R. Rivonkar for Appellant, Mr. R. Srinivasan with Mr. Sudin Usgaonkar for Respondent No.1
The Commissioner of Income Tax
1. Mrs. Sarita P. Shirke, 2. The Income Tax Appellate Tribunal
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Nature of Litigation
Tax appeal by Revenue against order of Income Tax Appellate Tribunal confirming exemption from gift tax.
Remedy Sought
Revenue sought to set aside the Tribunal's order and hold the assessee liable for gift tax.
Filing Reason
Revenue challenged the exemption granted to the assessee under Section 5(1)(ii) of the Gift Tax Act, 1957 for gifts made in Kashmir.
Previous Decisions
Deputy Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal held that the gifts were exempt under Section 5(1)(ii).
Issues
Whether gifts made in Kashmir by a non-resident assessee out of money transferred from other part of the country are exempt from tax under the Gift Tax Act, 1957?
Submissions/Arguments
Revenue argued that the gifts were not exempt because the money was transferred from within India.
Assessee argued that the gifts were made in Kashmir, which is outside India, and thus exempt under Section 5(1)(ii).
Ratio Decidendi
The situs of a gift is where the gift is made, not where the money originates. Gifts of money made outside India are exempt under Section 5(1)(ii) of the Gift Tax Act, 1957, regardless of the source of funds.
Judgment Excerpts
The Revenue is challenging the Judgment and Order passed by the Income Tax Appellate Tribunal which has confirmed the Order passed by the Deputy Commissioner of Income Tax (Appeals) and has held that Respondent No.1 was not liable to pay Gift Tax and her case was exempted under Section 5(1)(ii).
Whether the gifts made in Kashmir by the Assessee a Non Resident of India, out of the money transferred from other part of the country, is exempted from tax under the Gift Tax Act, 1957?
Procedural History
The Deputy Commissioner of Income Tax (Appeals) held the gifts exempt. The Income Tax Appellate Tribunal confirmed that order. The Revenue appealed to the High Court, which admitted the appeal and framed a substantial question of law. The High Court dismissed the appeal.
Acts & Sections
- Gift Tax Act, 1957: 5(1)(ii)
