COMMISSIONER OF GIFT TAX Vs. RAJA RAMALINGAM S

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal referred the following question for the opinion of this Court under s. 26(1) of the GT Act, 1958 :

(2.) THE assessee, Dr. S. Raja Ramalingam, is a resident of Salem. He is employed as a doctor at Canton in Ohio in United States of America having left India on 28th June, 1968. On 11th May, 1973 he obtained a draft from the State Bank of India, New York Branch drawn in favour of his father Sri V. S. D. Sundararaja Chettiar on the State Bank of India, Salem, for Rs. 89,552.24. That was despatched by him by post to his father at Salem on 14th May, 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 encahsed by the assessee's father on 4th June, 1973 and the proceeds were credited in the accounts of Kumarashanmugham in the books of the assessee's father on the same day.

(3.) BEFORE us the learned senior standing counsel appearing for the Department submitted that in order to have a gift completed there must be a donor; there must be a donee and the gift must be accompanied by delivery of possession. It was submitted the assessee purchased demand drafts in the name of his relations, who were in India. The drafts were purchased in American banks. It is no doubt true that the American Dollars cannot be despatched to India, which would be in violation of the Foreign Exchange Regulation Act. Two drafts were purchased in the name of the father with a direction to encash the same and hand over the money to the assessee's brother and mother. One draft was purchased directly in the name of his father as a gift to him. The learned senior standing counsel pointed out that when the drafts were sent by post through post office, the post office cannot be an agent of the donees. If at all, the post office can be an agent of the donor. It was further submitted that there was no evidence on record to show that the donees made a request to make the gifts to them. In the absence of such a request, it was submitted that the post office cannot act as an agent of the donees. According to the learned senior standing counsel the gift became complete only on delivery and such a delivery took place when the drafts were encashed at Salem in India and not outside the taxable territories. There is no request or any agreement between the donor and the donee requesting to send the moneys by way of gift from America. The learned senior standing counsel also pointed out that in the case of gifts made by the assessee to his mother and brother, the drafts had been taken in the name of the assessee's father, but the assessee had requested his father to encash the drafts and hand over the moneys to the donees and thus it was clear that the assessee had constituted his father as an agent for delivering the money in question to the donees and that since the assessee's father encashed the drafts and constructively handed over the money to the donees at Salem, such gift took place only at Salem. It was, therefore, submitted that the Tribunal was not correct in granting exemption under s. 5(1)(ii)(a) of the GT Act, in the case of the assessee.