Gift-tax exemption for foreign remittances fails where demand drafts are delivered in India through the donor's agent.

Gifts remitted from the United States by purchasing demand drafts and posting them to relatives in India were not exempt under section 5(1)(ii)(a) of the Gift-tax Act, 1958. The exemption applied only where the gifted movable property was situated outside India and the gift was completed outside the taxable territory. A draft or cheque sent by a non-resident donor on his own is treated as delivered through the donor's agent in India, so the gift is completed in India on delivery. On the stated facts, there was no material showing that the donees requested the remittance, and the gifts were therefore liable to gift-tax in India.

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Issues: Whether gifts remitted from the United States by purchasing demand drafts and posting them to relatives in India were exempt from gift-tax under section 5(1)(ii)(a) of the Gift-tax Act, 1958.

Analysis: The exemption applied only if the gifted movable property was situated outside India and the gift was completed outside the taxable territory. Where a non-resident donor sends a draft or cheque to India on his own, the post office or intermediary acts as the donor's agent and the gift is completed in India on delivery. On the facts, there was no material to show any request by the donees to remit the drafts, and the drafts sent to the father for onward delivery to the brother and mother were delivered through the donor's agent in India. The purchase of drafts abroad did not by itself complete the gift outside India.

Conclusion: The gifts were not exempt under section 5(1)(ii)(a) and were liable to gift-tax in India.

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