The exemption under Section 5(1)(ii) of the Gift Tax Act, 1958, for gifts of movable property situate outside India made by non-resident Indian citizens is applicable only if the gifts are completed outside India.

THANIKKACHALAM, J.

At the instance of the Department, the Tribunal referred the following common question for the asst. yrs. 1974-75 and 1976-77 for the opinion of this Court under s. 26(1) of the GT Act, 1958 (hereinafter referred to as "the Act") :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that there was no liability to gift-tax in respect of the gifts made by the assessee, as the gifts are exempt under s. 5(1) (ii) of the GT Act, 1958 ?" *

2. The assessee, Abdul Kader, is a non-resident within the meaning of the IT Act, 1961. He is also a non-citizen of India. During the asst. yr. 1974-75, he made a gift of Rs. 43, 000 by purchasing a draft from a bank in Malaysia in the name of Thirumathi Nachia, who is his wife, and sending the same to India through the authorised channels of transmission of money. Nachia, wife of the assessee, received the draft and then distributed the money between herself and her son. So also for the asst. yr. 1976-77, a similar draft for Rs. 40, 000 was purchased by the assessee and sent to Nachi, who is resident in India as in 1974-75.

3. The assessee claimed exemption in respect of the abovesaid two amounts from gift-tax under s. 5(1) (ii) of the Act. According to the said provision, gift-tax shall not be charged under the Act in respect of the gifts made by any person of movable property situate outside the territories unless the person being an individual, is a citizen of India and is ordinarily residing in the said territories. The GTO refused to accept the contention put forward by the assessee. According to the GTO, the gift was not completed in India as per s. 125 of the Transfer of Property Act. The GTO pointed out that when the gift was completed in India, the property was situated in India and not outside the territory of India. The GTO further pointed out that the drafts received in bank have reached the donee as per the desire of the assessee and not as per the desire of his wife. Further, the gift has not taken place outside the territories as contended by the assessee. For these reasons, the GTO held that the exemption under s. 5(1) (ii) of the Act would not be available to the assessee. However, on appeal, the AAC, following certain earlier decisions of the Tribunal on this point, held that the amount gifted by the assessee by means of draft to his wife purchased abroad is exempt from gift-tax. Aggrieved, the Department filed a second appeal before the Tribunal. The Tribunal confirmed the order passed by the AAC.

4. Learned standing counsel appearing for the Department, submitted that though the draft was purchased in Malaysia in the name of the wife of the donor, it was accepted by the donee only in India. Therefore, the gift was completed in India as per the provisions of s. 125 of the Transfer of Property Act. Learned standing counsel further submitted that when the gift was completed, the movable property was situated in India and, therefore, exemption under s. 5(1) (ii) of the Act is not possible in the case of the assessee. Learned standing counsel further submitted that the gift was sent according to the desire of the donor and not according to the desire expressed by the donee. It was further pointed out that there is no evidence on record to show that the donee either expressly or impliedly requested the donor to send the gift by draft through the post office. Therefore, in the present case, it cannot be said that the post office acted as agent on behalf of the donee so as to contend that the gift took place outside India. For all these reasons, it was submitted that the Tribunal was not correct in granting exemption under s. 5(1) (ii) of the Act in the case of the assessee. On the other hand, none was present on behalf of the assessee. We have heard learned standing counsel. for the Department and perused the records carefully.

5. The fact remains that sums of Rs. 43, 000 and Rs. 40, 000 were sent from Malaysia