Non-resident gifts by foreign draft were completed abroad and treated as movable property outside India, exempt from gift-tax.

A non-resident donor's remittances by foreign draft to his wife in India, later deposited in accounts of the wife and minor sons, were held to be gifts of movable property situated outside India. The gift was completed when the drafts were purchased and posted abroad under the prior understanding between donor and donee, so the transfer was beyond the donor's control and the post office operated as the donee's agent. On that basis, the gifts fell within the exemption for movable property situated outside India and were not subject to gift-tax.

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Issues: Whether gifts remitted by a non-resident donor by foreign drafts to his wife in India, and thereafter deposited in bank accounts of the wife and minor sons, were gifts of movable property situate outside India so as to fall within section 5(1)(ii) of the Gift-tax Act, 1958 and not be exigible to gift-tax.

Analysis: The assessment could not rest merely on an initial communication treating the remittances as taxable, because taxability depends on the real facts and the correct application of law. The assessee was admittedly a non-resident, the remittances were made abroad by drafts, and the appellate finding was that the mode of remittance was in accordance with the prior understanding between husband and wife. On that footing, the remittances were complete when the drafts were purchased and posted abroad, and the gift was beyond the donor's control. In such a situation, the post office functioned as the agent of the donee, and the gifts were of movable property situated outside India.

Conclusion: The gifts were exempt under section 5(1)(ii) of the Gift-tax Act, 1958 and were not exigible to tax.

Ratio Decidendi: Where a non-resident donor remits money abroad by drafts under an understanding with the donee, the gift is completed outside India when the drafts are posted abroad, and such gift of movable property situated outside India falls within section 5(1)(ii) of the Gift-tax Act, 1958.

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