Gift-tax liability on resident donor's gift was upheld despite the property being placed outside the extending territories.

Gift-tax liability arose on a transfer of title by gift, with section 3 of the Gift-tax Act operating as a charging provision subject to the exemption scheme in section 5. The situs of the gifted property was not decisive; the taxable event was the gift itself. A resident within the territorial reach of the Act remained liable, and the fact that the gift corpus was placed in Jammu and Kashmir did not exclude tax where the exemption for movable property outside the extending territories was inapplicable. On these principles, the gift was held liable to gift-tax in the hands of the assessee.

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Issues: Whether the gift of Rs. 20,000 made in the State of Jammu and Kashmir was liable to gift-tax in the hands of the assessee.

Analysis: Section 3 of the Gift-tax Act was held to be a charging provision operating subject to the other provisions of the Act. The charge under the Act was read with the exemption provisions in section 5, and the taxable event was identified as the transfer of title by gift, not merely the situs of the gifted property. On the facts, the assessee was a resident of Hoshiarpur and came within the territorial reach of the Act. The placement of the gift corpus in Jammu and Kashmir did not exclude liability because the exemption for movable property outside the extending territories did not assist a person ordinarily resident in the territories to which the Act applied.

Conclusion: The gift was liable to gift-tax in the hands of the assessee and the question was answered in the affirmative, against the assessee and in favour of the Revenue.

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