TMI Blog1967 (4) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... , the year ended April 12, 1953, the company issued fresh capital. Acting under the provisions of section 81 of the Indian Companies Act, 1956, the company issued a circular to the shareholders stating that they could renounce the shares offered to them in favour of any person or persons, that if they wished to exercise such a right, they must sign the form of renunciation and their nominees must also sign in the prescribed acceptance form. These forms were sent to the shareholders as enclosures to the said circular.The assessee, Chockalingam Chettiar, received that circular, and the company had offered to allot to him from out of the fresh capital, 800 equity shares. On June 15, 1957, the assessee signed the form of renunciation in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the gift in question was a taxable one under the Gift-tax Act. But so far as the valuation of the gift is concerned, the Tribunal directed the Gift-tax Officer to as certain " the market quotations for the rights " as on the relevant date of purchase and subject such market value to gift-tax. It is the decision of the Tribunal that is challenged on this reference. Learned counsel appearing for the assessee strenuously contended with reference to the definition of " gift " in section 2(xii) of the Gift-tax Act that the gift must affect some existing movable or immovable property and not future property. The definition in section 2(xii) reads thus : " ' Gift ' means the transfer by one person to another of any existing movable or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to increase the subscribed capital of the company by allotment of further shares, then, (a) such further shares shall be offered to the persons who at the date of the offer, are holders of the equity shares of the company in proportion, nearly as circumstances admit, to the capital paid up on those shares at that date ; (b) the offer aforesaid shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days from the date of the offer within which the offer, if not accepted, will be deemed to have been declined ; (c) unless the articles of the company otherwise provide, the offer aforesaid shall be deemed to include a right exercisable by the person concerned to renounce the shares off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest measured by a sum of money, and made up of various rights contained in the contract including the right to a sum of money of a more or less amount." It would, therefore, follow that the moment the appropriate circular under section 8 of the Indian Companies Act, was issued to Chockalingam Chettiar and other shareholders, a right to obtain a specified number of shares in the fresh issue of capital was aslo conferred on them. This right was a tangible right which could be conveyed by renunciation and which could also be sold and, therefore, it cannot be construed as an interest in future property. It was existing property as defined in the Gift-tax Act. Our attention has been drawn by the learned counsel for the department to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne new share for one old share), and the number of rights is expressed in terms of the number of shares owned rather than the number of shares which may be acquired ... The announcement of the granting of the rights (12-3-1956), states the date when the stock records will be closed to determine the stockholders on record (here 26-4-1956), to whom the warrants will be issued, and also the later date when subscriptions will be payable (here 2-7-1956). Between the date of the announcement and the date of the issuing of the warrants (here 15-5-1953), the stock and the rights are inseparable, and the stock is dealt in ' rights-on '. After the warrants are issued, the stock is dealt in ' ex-rights ', and the rights are dealt in separately. " We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cal with that in T. C. No. 80 of 1963 and, therefore, this case was also heard along with it. The assessee is one K. T. Kandaswami Chettiar, and he was a shareholder in Dhanalakshmi Mills Ltd., Tirupur. The assessee renounced the additional 300 shares offered to him in the fresh capital issued by the company under section 81 of the Companies Act, in favour of his four sons. The question was whether the shares thus renounced would be a gift for the purpose of assessment to gift-tax, and the Tribunal after holding that the gift was taxable, issued a direction similar to the one in T. C. No. 80 of 1963 for ascertaining its value. The two questions referred to us here for decision in this case are whether there was any gift of the right to obta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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