very interesting point arises in present appeal inasmuch as assessee contends that gift of Rs. 1 lakh made by him at Sringar [Jammu & Kashmir] is exempt from levy of gift-tax as Srinagar is outside taxable territories. 2. assessee in this case filed gift-tax return on 28-12-1982 showing value of taxable gifts at Rs. 29,180. In aforesaid return, he had indicated that sum of Rs. 1 lakh gifted by him at Srinagar was claimed to be exempt under section 5[1] [ii] of Gift-tax Act, 1958, ['the Act']. According to GTO assessee who was resident of Ahmedabad had transferred sum of Rs. 101 from his account with Bank of Maharashtra, Relief Road, Ahmedabad to branch of same bank of Srinagar on 13-12-1982 to open savings bank account there. Similarly donee A. P. Sheth Family Trust also transferred Rs. 101 to same branch for same purpose. GTO further observed that donor thereafter sent Rs. 1,05,000 by demand draft to be deposited in savings account No. 452 opened in Bank of Maharashtra, Srinagar on 24-3-1982. On same day amount of Rs. 1 lakh was withdrawn by cheque and handed over to donee which was deposited in account of donee in same bank. According to GTO aforesaid made of gift did not quality for exemption under 5[1] [ii], as according to him, amount of Rs. 1 lakh did not acquire character of movable property situated outside territories to which Act extended. He accordingly proceeded to disallow claim of assessee and brought to tax sum of Rs. 1 lakh under Act along with other gift declared in returns. 3. matter was taken up in appeal before AAC wherein arguments similar to ones advance before GTO were addressed. AAC after setting out facts which had been placed before him and are not disputed before us, by either side, proceed to dispose of matter by observing as under: "From above transactions, it is noticed that appellant has maneuvered his affairs in nice way. It is to be noted here that both donor and donee are residents of 14, Ashwin Society, Fatehpur, Paldi, Ahmedabad. appellant is havingh is savings bank account with Bank of Maharashtra, Relief Road branch Ahmedabad. appellant with drawn amount form this account and sent D. D. to Srinagar branch of Bank of Maharashtra, nationalised bank having its head office as Poona. Similarly, donee, A. P. Sheth family Trust has also transferred sum of Rs. 101 from their bank account from Ahmedabad to Srinagar for opening savings bank account at Srinagar. appellant as well as donee, Shri V. A. Sheth, managing trustee of A. P. Sheth family trust travailed right from Ahmedabad to Srinagar for making gift there, appellant made gift of Rs. 1 lakh by cheque drawn on Bank of Maharashtra Srinagar branch and handed over same there. donee accepted amount and deposited same in bank account opened there for such purpose. For making gift, money has travailed from Ahmedabad to Srinagar. Moreover, both donor and donee are resident of Paldi, Ahmedabad and they had gone to Sringar only with aim of making gift irrationally conceived as outside territory of Gift-tax act and thereby evading payment of gift tax. It appears that money must have been brought back to Ahmedabad after transition are over. Moreover as per section 5[1] [ii] of Gift-tax Act same cannot be considered as expert from Gift-tax Act section 5[1] [ii ] reads as under: [ii] of movable property situate outside said territories unless person - [a] being individual, is citizen of India and is ordinarily resident in said territories, or' On plain reading of section 5[1] [ii] o f Gift-tax Act, it appear that appellant case is not covered by above section. In view of above facts and misleading circumstances of case, all inroping operation within taxable territories, I am of opinion that GTO was right in taxing amount of Rs. 1 lakh as taxable gift. Accordingly, gift-tax assessment made by GTO is hereby confirmed and appeal is dismissed ". 4. learned council for assessee has advanced detailed arguments before us which have proceeded on more or less similar lines as had been advanced before AAC. To summarise his arguments it was submitted: [1] that donor in this case is person who is resident but not ordinarily resident for purposes of income-tax as well as gift-tax. it was contended that exemption envisaged in section 5[1] [ii] was restricted to individual who was citizen of India but not ordinarily resident in taxable territories. According to him, assessees having status other than this were not entitled to exemption. According to him, this was not case of avoidance of tax as sought to be made out by revenue but only question of taking advantage of tax provision and within four corners of law. It was accordingly contended that as gift in question fulfilled all conditions for exemption as laid down by section 5[1] [ii] , there was no reason why same should not be granted. He also drew our attention during course of argument to certain provisions of Income- tax act, 1961 such as, section 80HH for contention that certain fawcilities were to be provided to persons who were located in certain areas. 5. learned departmental representative, on other hand, relied kly on orders of GTO as well as AAC. He contended that both donor and donee were related to each other and gift was made at Srinagar purely with object of avoiding payment gift-tax. He even questioned validity of transaction on ground that there was no acceptance of gift and there was nothing on record to prove that in fact donor and donee had gone to Srinagar and that gift had been made and accepted at Srinagar. According to him, provisions in Act whereby State of Jammu and Kashmir had been excluded from purview of Act was meant for persons who were residents or subjects of State Jammu and Kashmir. According to him benefit was not to be derived by persons such as donor and donee in present appeal. According to him, ratio of decision of Hon'ble Supreme Court in case of McDowell & Co. Ltd. v. CIT [1985] 154 ITR 148 would squarely apply. He referred to observations of his Lordship Justice Chinnappa Reddy at page 152. 6. We have examined rival contention and have also perused material on record. There is no dispute as far as facts are concerned inasmuch as these have been reproduced by GTO as well as AAC in their orders. question to be decided is whether assessee satisfies conditions laid down by section 5[1] [ii] t o entitled him to exemption. Before conditions laid down by section 5[1] [ii] t o entitled him to exemption. Before we proceed to do so, we have to refer to section 1 of Act, which reads as follows: "1 [1] This act may be called Gift-tax Act, 1958. [2] It extends to whole of India except State of Jammu and Kashmir." 7. Section 2[xxiiia] extends Act to Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry. It is significant to not that Jammu and Kashmir does not appear in this clause. We would now refers to section 5[1] , which is relevant section for purposes of deciding matter. This reads as under: "[1] Gift-tax shall not be charged under this act in respect of gifts made by any person - [i] of immovable property situate outside territories to which this Act extends' [ii] of movable property situate outside said territories unless person - [a] being individual, is citizen of India is ordinarily resident in said territories, for [b] Not being individual, is resident in said territories during previous year in which gift is made;" 7.1 reading of section 5 coupled with section 1 as well as section 2[xxiiia] all of which have been reproduced above would clearly show that provisions of Act are not to extend to Jammu and Kashmir in respect of individual who is citizen of India and is resident in taxable territories which in this case happens to be India excluding Jammu and Kashmir. arguments of learned departmental representative to effect that exemption under section 5[1] [ii] was to be restricted only to person resident in Jammu and Kashmir are not supported by language of Act inasmuch as no such provision is stated anywhere nor can it be read in any of sections referred to in earlier part of this order. According to us exemption envisaged in clause [1] and [ii] of section 5[1] is entirely based on situs of property gifted. Act clearly grant exemption in respect of movable property situated in Jammu and Kashmir or elsewhere been mentioned earlier outside India subject to fulfilement of two conditions which have already been mentioned earilier. amount of Rs. 1 lakh which had been gifted by donor was clearly movable property situated in Jammu and Kashmir and gift was made and accepted in same territory. There is certificate on page 22 of paper book issued on 24-3-1982 by Manager, Bank of Maharashtra, Srinagar Branch, which reads as follows: "This is to be certified that Shri Deepak Anubhai Sheth, ro 14 Ashwin Society Fatehpur Paldi, Ahmedabad [Gujarat] has transferred amount of Rs. 1,00,000 [Rs. 1 lakh only] from his savings account No. 452 with us tot he savings account No. 453 of Shri A. P. Sheth [Family Trust] 14-Ashwin Society Feathpur Paldi, Ahmedabad [Gujarat] with us vide cheque No. 203302 dated 24th March 1982, in favour of said Trust for like amount. Shri D. A. Sheth has handed over said cheque personally at Srinagar to managing trustee of Shri A. P. Sheth [Family Trust] Mr. V. A. Sheth. This certificate has been issued at request of managing trustee." 7.2 This certificate belies contentions of departmental representative to effect that there was no evidence the donor and donee were in fact in Srinagar and gift had been made and accepted in Srinagar. attempt was made to contend that bank manager had exceeded his authority in issuing such certificate and that there was no independent evidence to support gift. We do not understand logic behind this contention inasmuch as it was bank manager who was proper person to issue such certificate. It may not be his normal duty to issue such certificate, but he has done so at request of donee who probably anticipated that such problem would arise and wanted to arm himself with relevant evidence in this respect. As territorial jurisdiction of Act is whole of India except State of Jammu and Kashmir, it would naturally follow that all gifts made and accepted outside India would quality for exemption under section 5 subject to fulfillment of further conditions. In case contentions of department have to be accepted it would mean that even gifts made in other parts of world would not qualify for exemption. We do not think there is any difference between gifts made in Jammu and Kashmir and elsewhere in world, as according to us provisions of law are absolutely clear. reference made by learned counsel for assessee to section 80HH is not relevant to point at issue because that speaks of industrial undertakings or hotels set up in backward areas. 7.3 We would also like to point out that wherever Legislature intended to provide particular benefit or exemption to particular category of persons it indicated so. In this connection we refer to section 10[26A] of Income-tax Act, which reads as under: :[26A] any income accruing or arising to any person from any source in district of Ladakh or outside India in any previous year relevant to any assessment year commencing before 1st day of April, 1989, where such person is resident in said district in that previous year": Similar provisions have been laid down in section 10[26] for members of Scheduled Tribes living in specified areas. 7.4 reading of above section clearly shows that residence in district of Ladakh for certain period was necessary to avail of exemption. There are no such conditions laid down by section 5 as to residence of donor outside taxable territories to give impression that benefit was to be availed of by only those persons who were residents of Jammu and Kashmir. 7.5 Lastly we come to decision of Hon'ble supreme court in case of McDowell and Co. Ltd. [supra] on which k reliance has been placed by learned departmental representative. According to us matter before us cannot be termed as one of tax avoidance inasmuch as theses has taken advantage of legal provision which is part and parcel of Act. It cannot be termed as colourable device by any stretch of imagination. We would at this stage refer to observations of his Lordship Justice Ranganath Misra in McDowell and Co, Ltd. case [supra] which reads as under: "Tax planning may be legitimate provided it is within framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain belief that it is honorable to avoid payment of tax by resorting to dubious methods. It is obligation of very citizen to pay taxes honestly without resorting to subterfuges." [p. 171]. 7.6 According to us transaction of gifts effected by assessee is within framework of law and cannot be termed as dishonest or dubious with view to dupe revenue. According to us ratio of decision of Hon'ble Supreme Court would not apply to facts of present case. 8. We would accordingly cancel order of AAC and allow appeal of assessee. *** DIPAK A. SHETH v. GIFT TAX OFFICER