1998 (9) TMI 108 - AT - Income Tax

Summary

Issues:
1. Exemption of gift under s. 5(1)(ii)(a) of the GT Act.
2. Proper application of law regarding the exemption of gift.
3. Consideration of substance over form in transactions.
4. Interpretation of the law in relation to movable properties situated in Jammu and Kashmir.

Analysis:

1. The appeal involved the issue of whether the gift of Rs. 32 lakhs made by the assessee is exempt under s. 5(1)(ii)(a) of the GT Act and not taxable in his hands. The assessee, a non-resident Indian, purchased drafts from a bank in Ahmedabad, opened accounts in Srinagar, and made gifts to trusts in Jammu and Kashmir. The Revenue contended that the movable property was not actually situated in Jammu and Kashmir, invoking the doctrine of substance over form.

2. The Assessing Officer initially granted the exemption claimed by the assessee, but the order was later set aside by the CGT, leading to a fresh assessment denying the exemption. The CIT(A) allowed the claim for exemption, emphasizing that the transactions were conducted at arm's length, and the gift was made and received through proper banking channels in Srinagar. The Tribunal upheld the decision, citing a similar case where the exemption was granted based on the situs of the gifted property.

3. The Departmental Representative argued that the transactions were stage-managed and did not involve actual movable property in Jammu and Kashmir. However, the assessee's counsel contended that the law exempted gifts of movable property situated in Jammu and Kashmir, and the assessee availed the benefit within the statutory framework without any colorable device. The Tribunal agreed that the transactions were lawful and upheld the exemption under s. 5(1)(ii)(a) of the GT Act.

4. The Tribunal referenced a previous decision where it was held that the Act granted exemption for gifts made and accepted outside India, including Jammu and Kashmir, as long as certain conditions were met. The Tribunal concluded that the gift made by the assessee fell within the legal framework and was not an attempt to defraud the Revenue. Therefore, the appeal filed by the Revenue was dismissed, affirming the exemption of the gift of Rs. 32 lakhs under s. 5(1)(ii)(a) of the GT Act.