1989 (12) TMI 11 - HC - Income Tax

Interpretation of Gift-tax Act exemption for non-resident gifts clarified by court decision

AJ Gomes Versus Commissioner Of Gift-Tax

AJ Gomes Versus Commissioner Of Gift-Tax - [1991] 187 ITR 320, 56 TAXMANN 151 Issues:1. Interpretation of section 5(1)(ii) of the Gift-tax Act regarding exemption of gifts.2. Whether gifts made by the assessee in previous years are exempt under section 5(1)(ii) of the Act.Analysis:1. The judgment concerns the interpretation of section 5(1)(ii) of the Gift-tax Act in relation to the exemption of gifts. The key issue revolves around whether gifts made by the assessee, a non-resident, to his wife and minor sons through remittances from abroad are exempt under this provision. The Appellate Assistant Commissioner held that the gifts were complete when the drafts were purchased abroad and posted, considering the relationship between the donor and the donee. The Appellate Tribunal, however, emphasized that the taxability of the gifts was related to the deposits made in the names of the sons and wife, not the remittances made by the assessee. The court found that the Tribunal erred in overstressing the initial communication from the assessee's representative and disregarding the circumstances under which it was made. The court emphasized that the taxability of a transaction should be based on the facts and relevant provisions of law, not solely on admissions made by the assessee.2. The second issue pertains to whether the gifts made by the assessee in previous years are exempt under section 5(1)(ii) of the Act. The court considered the crucial relationship between the donor and the donee, who were husband and wife, and the prior understanding between them regarding remittances. The court held that the gifts were complete when the drafts were purchased and posted abroad, as per the understanding between the husband and wife. The court concluded that the gifts were of movable property situated outside India, and the assessee, being a non-resident, was entitled to the benefit of section 5(1)(ii) of the Gift-tax Act. Therefore, the court answered both questions of law in favor of the assessee and against the Revenue, holding that the gifts were not exigible to tax and the assessee was entitled to the benefit of the relevant provision.This judgment clarifies the application of section 5(1)(ii) of the Gift-tax Act in cases involving gifts made by non-residents to family members in India and emphasizes the importance of considering the specific circumstances and relationships between the parties involved in determining the taxability of such gifts.