Why can't I buy a gift using my iTunes credit (from a gift card)?
Someone bought an iTunes gift card, and I want to buy an app for my friend, but I can't use the gift card. Why?
iPod touch
You can only purchase items for yourself from the gift card.
If you have a credit or debit card account setup in your iTunes account you can purchase apps to "gift"...
See: Send Music, Videos, Audiobooks, and Apps as Gifts
From here > iTunes Gift Options