Gift-tax exemption depends on the donor's capacity; gifts by a karta without representative capacity remain exempt.

Where the record did not show that the karta acted in a representative capacity when making gifts to his wife, the gifts were treated as made by him as husband and not on behalf of the Hindu undivided family. On that footing, the exemption under section 5(1)(viii) of the Gift-tax Act could not be denied merely because the funds came from family assets. The operative test is the capacity disclosed by the transaction, and absent material showing a gift made for the family, the exemption remained available to the assessee.

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Issues: Whether the gifts made from the Hindu undivided family funds by the karta to his wife were made by him in a representative capacity so as to take the case outside the exemption under section 5(1)(viii) of the Gift-tax Act.

Analysis: The material on record did not show that Jai Chand acted as manager of the Hindu undivided family when the gifts were made. The Tribunal had proceeded on the basis that the earlier Andhra Pradesh decision governed the matter, and the Court accepted that there was nothing to indicate that the transfers were made otherwise than by Jai Chand as husband. In the absence of material showing a representative capacity, the departmental contention that the exemption was unavailable could not be accepted.

Conclusion: The gifts were treated as having been made by Jai Chand in his individual capacity as husband, and section 5(1)(viii) was held to apply in favour of the assessee.

Ratio Decidendi: Where the record discloses no material that a gift was made by a karta in a representative capacity on behalf of a Hindu undivided family, the gift is to be treated according to the capacity disclosed by the transaction and the relevant exemption cannot be denied merely because the funds originated from the family estate.

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