Gift-tax exemption under Section 5(3) fails where the later transfer is factually distinct from the earlier gift received.

Section 5(3) of the Gift-tax Act, 1958 applies only where the later transfer can be directly traced to the earlier gift received. On the facts, the property later transferred by the assessee arose from independent transactions involving land, partnership assets and existing charges, rather than from a mere return of the gift received from her husband. Because the connection between the two transfers was too remote and the assessment rested on a mistaken factual basis, the exemption was available and the gift-tax assessment could not be sustained.

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Issues: Whether the transfer made by the assessee attracted Section 5(3) of the Gift-tax Act, 1958, so as to sustain the gift-tax assessment.

Analysis: The statutory exemption under Section 5(3) applied only if the later transfer could be traced to the gift earlier received. On the facts found from the registered documents, the property later transferred by the assessee was acquired through independent transactions involving land, partnership assets, and subsisting charges, and not as a mere return of the gift received from her husband. The connection between the two transfers was too remote, and the assessment had proceeded on a mistaken factual basis.

Conclusion: Section 5(3) did not apply. The assessment was unsustainable.

Final Conclusion: The assessee succeeded and the gift-tax assessment was set aside.

Ratio Decidendi: Section 5(3) of the Gift-tax Act, 1958 is attracted only where the later transfer can be directly connected to the earlier gift received; a remote or factually distinct transaction does not qualify as a gift out of that earlier gift.

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