Gift-tax applies where delivery of draft proceeds occurs in India, even if the draft was purchased abroad.

A gift of movable property is completed by delivery of possession, and where demand drafts purchased abroad are encashed in India and the proceeds are handed over there, the effective transfer occurs in India. On these facts, the court held that the gift was completed within Indian territory and therefore fell within the charging scope of the Gift-tax Act. The assessee's contention that the gift was made abroad was rejected, and the transaction was treated as taxable in India.

---

---

Issues: Whether the purchase of a draft abroad in the name of another person constituted a gift made abroad, or whether encashment of the draft in India made the gift taxable in India under the Gift-tax Act.

Analysis: The assessee purchased demand drafts in an American bank by paying U.S. dollars and sent them to his wife in India, who encashed the drafts and paid the amounts to the sons. The Court held that a valid gift of movable property is completed by delivery of possession, and in the present case the effective delivery took place only when the drafts were encashed and the money was paid in India. The Court distinguished the earlier view relied on by the Tribunal and followed its own decision holding that, on these facts, the gift was completed within Indian territory and was therefore within the charging ambit of the Gift-tax Act.

Conclusion: The gift was made in India and was liable to gift-tax; the question was answered in the negative and against the assessee.

Ratio Decidendi: For movable property, a gift is completed where delivery of possession occurs, and if the draft is encashed and the money handed over in India, the gift takes place in India for gift-tax purposes.

---