Gift-tax exemption for donations linked to exempt income under section 11 prevented levy on the transfer.

A donation to a political committee was held not liable to gift-tax because the assessee's income had already been recognised as exempt under section 11 of the Income-tax Act, 1961. Applying section 45 of the Gift-tax Act, 1958, the court treated that exemption as preventing levy of gift-tax on the relevant donation. The legal position applied is that where the underlying income is exempt under section 11, the connected transfer does not attract gift-tax under section 45. The question was answered in favour of the assessee, and the donation was not subject to gift-tax.

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Issues: Whether the assessee was entitled to exemption from gift-tax in respect of the donation made to the political committee.

Analysis: The assessee's own case had already been held to be entitled to exemption under section 11 of the Income-tax Act, 1961. On that basis, and applying section 45 of the Gift-tax Act, 1958, the donation could not attract gift-tax.

Conclusion: The question was answered in the affirmative and in favour of the assessee; the sum donated was not liable to gift-tax.

Ratio Decidendi: Where the assessee's income is exempt under section 11 of the Income-tax Act, 1961, section 45 of the Gift-tax Act, 1958 prevents levy of gift-tax on the relevant donation.

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