Gift-tax exemption for child's higher education applies when contemporaneous evidence shows the educational purpose and reasonable gift value.

Gifts made for a child's higher education may qualify for exemption under section 5(1)(xii) of the Gift-tax Act, 1958 where contemporaneous materials show that educational purpose and the amount or property gifted is reasonable in the circumstances. Here, the donor's return and statement indicated that the son was studying M.B.B.S. and that the gifts were intended for higher studies abroad; the transfer of cash and a car, later sold to fund further studies, supported that intention. Later events and alleged alternative motives did not displace the contemporaneous evidence, so the exemption was available.

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Issues: Whether the gifts made by the assessee to his son qualified for exemption under section 5(1)(xii) of the Gift-tax Act, 1958 as gifts for the education of his child.

Analysis: The assessee's return and accompanying statement contemporaneously disclosed that the donee-son was studying M.B.B.S. and that the gifts were intended for higher education abroad. The gifts consisted of cash and a car, the car having been transferred to the son and later sold to fund further studies. The statutory test under section 5(1)(xii) is whether the gift is for the education of children and is reasonable having regard to the circumstances of the case. On the facts, the surrounding materials established the donor's intention to provide for the son's higher education, and the Revenue's objections based on later events and alleged alternative motives were not sufficient to displace that intention.

Conclusion: The gifts were entitled to exemption under section 5(1)(xii) of the Gift-tax Act, 1958 and the assessee succeeded.

Ratio Decidendi: A gift qualifies for exemption when contemporaneous materials show that it was made for the child's higher education and the amount or property gifted is reasonable in the circumstances of the case.

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