Gift-tax exemption depends on situs of transfer; bank drafts encashed in India made the gift taxable.

Gift-tax exemption under section 5(1)(ii)(a) applies only where the gifted movable property is situated outside the taxable territories and the gift is in substance made outside India. On these facts, a non-resident bought bank drafts in his own name abroad, brought them into India, encashed them there, and then made the gift; the decisive transfer was therefore in India. Mere intention to gift abroad could not change the situs of the transaction. The earlier authority cited by the assessee was distinguished because the drafts there had been drawn in the donee's name abroad. The gift was not exempt.

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Issues: Whether the gift of Rs. 15,000 made by a non-resident, after bringing bank drafts drawn in his own name into India and encashing them there, was exempt as a gift of movable property situate outside the taxable territories under section 5(1)(ii)(a) of the Gift-tax Act, 1958.

Analysis: The exemption applies only where the gifted movable property is situate outside the taxable territories and the gift is in substance made outside India. Here, the assessee purchased drafts in his own name abroad, brought them into India, collected the money in India, and then made the gift. The decisive act of transfer occurred in India, and intention alone could not make the gift foreign in situs. The prior order relied upon by the assessee was distinguishable because in that case the drafts had been drawn in the donee's name abroad.

Conclusion: The gift was made within India and did not qualify for exemption under section 5(1)(ii)(a) of the Gift-tax Act, 1958; the Revenue's appeal succeeded.

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