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Issues:
1. Whether a gift of Rs. 1 lakh made at Srinagar is exempt from gift-tax as Srinagar is outside the taxable territories. Analysis: The assessee claimed exemption for a gift of Rs. 1 lakh made at Srinagar under section 5(1)(ii) of the Gift-tax Act, 1958. The Gift Tax Officer (GTO) disallowed the claim, stating that the amount did not acquire the character of movable property situated outside the taxable territories. The Appellate Assistant Commissioner (AAC) upheld the GTO's decision, noting that the donor and donee were residents of Ahmedabad and the gift was made in a manner to evade gift-tax. The AAC confirmed the tax assessment. The assessee argued that the exemption in section 5(1)(ii) applied as the donor was a resident but not ordinarily resident in the taxable territories. The departmental representative contended that the gift was made to avoid tax and referenced the McDowell & Co. Ltd. case. The Tribunal examined the provisions of the Gift-tax Act and noted that the Act did not extend to Jammu and Kashmir for individuals who were citizens of India but not ordinarily resident in taxable territories. The Tribunal found that the gift fulfilled the conditions for exemption under section 5(1)(ii) as the amount was movable property situated in Jammu and Kashmir and the gift was made and accepted there. A certificate from the bank manager confirmed the transaction. The Tribunal rejected the department's argument that the gift was invalid due to lack of acceptance and emphasized that the Act provided exemption for gifts made and accepted outside India. The Tribunal distinguished the case from tax avoidance schemes, stating that the gift was made within the legal framework. The Tribunal referred to the McDowell & Co. Ltd. case but concluded that it did not apply to the present situation. Consequently, the Tribunal canceled the AAC's order and allowed the appeal of the assessee.
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