Gift-tax exemption for charitable trust gifts depends on the subsisting income-tax exemption position for the relevant assessment year.

Section 45(e) of the Gift-tax Act exempts gifts made by an institution or fund whose income is exempt under section 11 of the Income-tax Act, and that exemption must be tested year-wise on the basis of the subsisting assessment for the relevant year. For assessment year 1970-71, the trust's reassessment denying exemption had been cancelled in appeal, leaving the original assessment, which treated the trust as exempt under section 11, operative. Later assessment-year positions were not determinative. On that basis, the trust was regarded as an institution with exempt income for the relevant year, and no gift-tax assessment could be made for that year.

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Issues: Whether gifts made by the assessee-trust were exempt from gift-tax under section 45(e) of the Gift-tax Act because, for the relevant assessment year, the trust's income stood exempt under section 11 of the Income-tax Act.

Analysis: Section 45(e) excludes from the operation of the Gift-tax Act gifts made by an institution or fund whose income is exempt under section 11 of the Income-tax Act. The relevant assessment year had to be considered on the basis of the completed income-tax position as it then stood. For assessment year 1970-71, the reassessment that had denied the exemption was cancelled in appeal, and the original assessment, which treated the trust as exempt under section 11, remained operative. The later position in other assessment years was not decisive for the year in question, because the exemption under section 45(e) had to be tested year-wise.

Conclusion: The assessee was an institution whose income was exempt under section 11 of the Income-tax Act for assessment year 1970-71, so no gift-tax assessment could be made for that year.

Ratio Decidendi: For the purpose of section 45(e) of the Gift-tax Act, the decisive question is whether, for the relevant assessment year, the institution's income stands exempt under section 11 of the Income-tax Act on the basis of the subsisting income-tax assessment for that year.

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