Gift-tax exemption for movable property situated in Jammu and Kashmir upheld where the transfer occurred within the protected territorial framework.

Exemption under section 5(1)(ii)(a) of the Gift-tax Act, 1958 was held to depend on the situs of the movable property gifted, and a gift made and accepted within Jammu and Kashmir retained that territorial protection. The transaction was carried out through separate bank accounts and cheques at Srinagar, and the statutory benefit was not denied merely by recharacterising the arrangement on a substance-over-form basis. The earlier appellate view granting exemption was supported, and the Revenue's challenge failed.

---

---

Issues: Whether the gift of Rs. 32 lakhs was exempt under section 5(1)(ii)(a) of the Gift-tax Act, 1958 on the footing that the movable property was situated in Jammu and Kashmir and the gifts were made and received there.

Analysis: The transaction was found to have been carried out through separate bank accounts and cheques at Srinagar, and the substance of the arrangement was treated as a gift between the assessee and the trusts effected within the relevant territorial setting. The exemption under section 5 of the Gift-tax Act, 1958 was held to depend on the situs of the gifted movable property, and the reasoning adopted emphasised that the statutory benefit could not be denied merely by invoking substance over form where the transaction remained within the framework of the Act. The earlier appellate view granting exemption was supported by the Tribunal's own prior reasoning on the territorial scope of the Act and the exemption for movable property situated in Jammu and Kashmir.

Conclusion: The gift was held to be exempt under section 5(1)(ii)(a) of the Gift-tax Act, 1958, and the Revenue's challenge failed.

Ratio Decidendi: Exemption under section 5(1)(ii)(a) of the Gift-tax Act, 1958 turns on the situs of the movable property gifted, and a gift made and accepted within the protected territorial framework cannot be denied exemption merely by recharacterising the form of the transaction.

---