TMI Blog1996 (4) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... y him by post to his father at Salem on May 14, 1973, along with a covering letter wherein he stated that the said sum was a gift to his brother, S. Kumarashanmugham, to enable the latter to undergo medical education. The father was requested to encash the draft and hand over the money to the donee. The cheque was encashed by the assessee's father on June 4, 1973, and the proceeds were credited in the accounts of Kumarashanmugham in the books of the assessee's father on the same day. On February 8, 1974, the assessee obtained a draft for rupees one lakh from the State Bank of India, New York, drawn in favour of his father on the State Bank of India, Salem. That was despatched by the assessee to his father at Salem on February 12, 1974, along with a covering letter wherein the assessee stated that the said sum was a gift to his father. The said draft was encashed by the assessee's father on February 23, 1974, and the proceeds were credited in his capital account in his books. On February 21, 1974, the assessee obtained a draft for 7,500 dollars from Herson Bank at Canton in the United States of America in the name of his father on a bank at Salem and the same was despatched by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee paid the money to the American banks and obtained drafts and since the gifted properties were movable properties situate in America, the gifts were exempt from tax under section 5(1)(ii)(a) of the Gift-tax Act. However, the Department contended that the gifts were made in India and not in America. Therefore, no exemption can be granted under section 5(1)(ii)(a) of the Gift-tax Act. It was pointed out that the delivery took place only when the drafts were encashed at Salem in India, and, therefore, the gift transaction was completed within the Indian territory. Hence, the gifts sent by the assessee are assessable under the Gift-tax Act. However, the Tribunal held that in view of the fact that the Foreign Exchange Regulation Act was in force, the assessee cannot remit the American currency directly to India, and, therefore, the assessee purchased demand drafts in the name of the donees in India and thereafter sent the drafts by post to the donee in India. Therefore, when the drafts were purchased in the American banks, the assessee has forgone the ownership over the moneys by which the drafts were purchased. Hence, according to the Tribunal, the gift took place in American ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the Tribunal was not correct in granting exemption under section 5(1)(ii)(a) of the Gift-tax Act in the case of the assessee. We have heard learned senior standing counsel appearing for the Department and perused the records carefully. We have already set out the facts in detail. The assessee is a non-resident. On May 11, 1973, he purchased a draft from the State Bank of India, New York branch, drawn in favour of this father, V. S. D. Sundararaja Chettiar, on the State Bank of India, Salem, for Rs. 89,552.24. That was despatched by post to his father at Salem on May 14, 1973, along with a covering letter wherein he requested his father to encash the draft and hand over the money as a gift to his brother. So also on February 8, 1974, the assessee purchased a draft for Rs. one lakh from the State Bank of India, New York, drawn in favour of his father, on the State Bank of India, Salem. That was despatched to the father on February 12, 1974, along with a covering letter wherein he stated that the said sum was a gift to his father. The said draft was encashed by his father on February 23, 1974. Similarly, on February 21, 1974, the assessee purchased a draft for 7,500 dolla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Foreign Exchange Regulation Act, 1947, remitted from a country outside India in accordance with the provisions of the said Act and the rules made thereunder during the period between the 26th day of October, 1965, and ending on the February 28, 1966, would be exempt from tax. Thus, it will be seen that the above provision grants exemption in respect of movable property situate outside India under two conditions, viz., (a) if the donor is an individual, that is to say, a natural person ; (b) he is not either a citizen of India or ordinarily resident in India during the previous year. According to the assessee, he was not a resident, but he was a non-resident. There is no dispute in the present case that the property gifted was movable property. If a non-resident donor makes a gift in foreign exchange or foreign currency to a person in India and the bank draft or cheque or the currency is received by or on behalf of the donee outside India, there will obviously be no liability to gift-tax in respect of such a gift. That is because the subject-matter of the gift in such cases will be property situated outside India. Again, where the property in such foreign currency or foreign excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in Gomes (A. J.) v. CGT [1991] 187 ITR 320 and the decision of the Bombay High Court in Rajkumar Mills Ltd. v. CIT [1976] 103 ITR 92 and another decision of the Supreme Court in Shri Jagdish Mills Ltd. v. CIT [1959] 37 ITR 114, held that (1) when payment is received by cheque, the receipt is at the time when the cheque is delivered and not when it is encashed ; (2) if the cheque is sent by post, the receipt would be at the place where the cheque is posted, provided the mode of sending it by post is adopted at the express or implied request of the addressee. In such cases, the post office becomes the agent of the addressee. Otherwise, the receipt would be at the place where the cheque is delivered by the post office to the addressee ; (3) Having regard to business, a request to make payment by cheque may in itself imply a request to send it by post, while a request to remit the amount would be tantamount to an express request to send it by post ". As already pointed out, according to the facts arising in the present case, no request was made by the donees for making the gift by the donor. There is also no business relationship between the donor and the donees in the pres ..... 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