A watch gains $5$ seconds in $3$ minutes.
Since $3$ minutes $=180$ seconds,
\[
\text{Gain rate}=\frac{5}{180}
\]
For $1$ hour:
\[
1 \text{ hour } = 3600 \text{ seconds}
\]
Gain in $1$ hour:
\[
3600 \times \frac{5}{180} = 100 \text{ seconds}
\]
Thus, for every $3600$ seconds, the watch gains $100$ seconds.
From $7:00$ AM to $4:00$ PM, the elapsed time is:
\[
9 \text{ hours}
\]
Total gain in $9$ hours:
\[
9 \times 100 = 900 \text{ seconds}
\]
Now consider the additional $15$ minutes.
\[
15 \text{ minutes} = 900 \text{ seconds}
\]
Gain in $15$ minutes:
\[
900 \times \frac{5}{180} = 25 \text{ seconds}
\]
Therefore, total gain:
\[
900 + 25 = 925 \text{ seconds}
\]
Convert $925$ seconds into minutes:
\[
925 = 15 \text{ minutes } 25 \text{ seconds}
\]
Since the watch is ahead, subtract this from the indicated time:
\[
4:15:00 - 0:15:25 = 3:59:35
\]
Thus, the true time is approximately
\[
\boxed{4:00 \text{ PM}}
\]