1982 (7) TMI 187 - AT - Income Tax

Summary

Issues:
- Taxability of gifts of movable property outside India
- Interpretation of Section 5(1)(ii) regarding situs of gifted property
- Completion of gift upon instruction to transfer proceeds to donees
- Application of precedent in determining taxability of gifts

Analysis:
The judgment by the Appellate Tribunal ITAT MADRAS-A involves two appeals by the same assessee for the assessment years 1975-76 and 1976-77, consolidating a common issue. The assessee had made gifts of movable property to family members outside India, claiming they were not taxable due to the situs of the property. The gifts were directed through fixed deposits in foreign banks, with instructions to transfer the proceeds to the donees in India. The revenue authorities contended that the gifts became taxable upon receipt in India. The ITAT considered the interpretation of Section 5(1)(ii) regarding the situs of the gifted property and the completion of the gift upon instruction to transfer the proceeds to the donees.

In the case, the assessee argued that the property in fixed deposits should be deemed to have passed to the donees as soon as instructions were given to the banks in foreign countries. The assessee relied on a previous Tribunal order to support this position. Conversely, the revenue department argued that the gifts were complete only upon receipt by the donees in India, making the property taxable in India. The ITAT rejected the revenue's stance, applying the precedent where the delivery of the gifted property was deemed to have occurred in the foreign country upon instruction to transfer the proceeds.

The ITAT held that the assessee was entitled to the benefit of Section 5(1)(ii) for both assessment years, as the fixed deposits were considered property situated in the foreign country, and the delivery of the properties occurred when the instructions reached the foreign banks. Consequently, the ITAT allowed the assessee's appeal for the assessment year 1975-76 and dismissed the revenue's appeal for the assessment year 1976-77.