Movable property gift exemption applied to shares transferred in Kashmir; lawful tax planning was not treated as a colourable device.

Gifts of movable property situated outside the taxable territory were exempt under section 5(1)(ii) of the Gift-tax Act, 1958, where a non-resident assessee permanently resident in Dubai made the gifts and transferred the shares in Kashmir. The Court treated shares as movable property and accepted the concurrent finding that the funds and transfers took place in Kashmir, bringing the transaction within the statutory exemption. It also rejected the Revenue's allegation of a colourable device, holding that lawful tax planning to obtain an available exemption does not amount to tax evasion.

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Issues: Whether gifts of movable property made in Kashmir by a non-resident assessee were exempt under section 5(1)(ii) of the Gift-tax Act, 1958, and whether the transaction could be treated as a colourable device to evade gift-tax.

Analysis: Section 5(1)(ii) exempts gifts of movable property situated outside the taxable territory, subject to the stated exceptions. The assessee was a non-resident permanently residing in Dubai, and the gift as well as the related transfer of shares took place in Kashmir. The concurrent findings of the lower authorities were that the funds were transferred to Kashmir and the gifts were made there. The Court held that the facts did not justify treating the arrangement as a colourable device. It further held that tax planning within the framework of law does not become tax evasion merely because a taxpayer arranges affairs to obtain a lawful exemption. The Court also relied on the view that shares are movable property and, when transferred in Kashmir, fall within the statutory exemption.

Conclusion: The gifts and transfer of shares were held to be covered by the exemption under section 5(1)(ii) of the Gift-tax Act, 1958, and the Revenue's challenge failed.

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