Deemed gift exemption under Gift-tax Act extends to charitable transfers where the donee's status is established.

For section 5(1)(v) of the Gift-tax Act, a deemed gift is treated as a gift because section 2(xii) expressly includes transfers or conversions deemed to be gifts under section 4, so exemption may extend beyond actual voluntary gifts if the statutory conditions are met. A transfer of immovable property to a charitable foundation was therefore treated as exempt where the donee's charitable status was established, even though contemporaneous section 80G approval for the relevant period was not complete. The commentary states that the exemption was sustained and the consequential rectification order fell with the failed levy.

---

---

Issues: (i) Whether a deemed gift falls within the scope of section 5(1)(v) of the Gift-tax Act for purposes of exemption. (ii) Whether the transfer of immovable properties to Sarabhai Foundation was exempt from gift-tax under section 5(1)(v) of the Gift-tax Act.

Issue (i): Whether a deemed gift falls within the scope of section 5(1)(v) of the Gift-tax Act for purposes of exemption.

Analysis: The definition of "gift" in section 2(xii) of the Gift-tax Act expressly includes a transfer or conversion of property deemed to be a gift under section 4. On that footing, the exemption provision in section 5(1)(v) was read as covering not merely actual voluntary gifts but also deemed gifts, so long as the other conditions of the exemption are satisfied.

Conclusion: A deemed gift is eligible to be considered for exemption under section 5(1)(v) of the Gift-tax Act.

Issue (ii): Whether the transfer of immovable properties to Sarabhai Foundation was exempt from gift-tax under section 5(1)(v) of the Gift-tax Act.

Analysis: The Foundation was accepted as a charitable institution for the relevant assessment year, with exemption under section 11 of the Income-tax Act, 1961 having been upheld, and the absence of a contemporaneous section 80G approval did not defeat the donor's claim where the Foundation's charitable status stood established. The Revenue could not deny the exemption merely because the formal section 80G process had not been completed for the relevant period.

Conclusion: The transfer qualified for exemption under section 5(1)(v) of the Gift-tax Act.

Final Conclusion: The exemption claimed by the assessee was sustained, and the rectification order, being consequential to the failed levy, also stood cancelled.

Ratio Decidendi: For the purpose of section 5(1)(v) of the Gift-tax Act, a deemed gift is treated as a gift, and exemption cannot be denied where the donee's charitable character is established even if formal section 80G approval for the exact period is pending.

---