TMI Blog1968 (11) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ot accepted by the Gift-tax Officer and the Tribunal, was that there was no actual transfer of the shares to his daughter. He maintained that by the first settlement deed he retained in himself a life interest in the first lot of shares, the remainder therein being vested absolutely in his daughter, that he had not handed over the certificates to his daughter, though the whole lot of shares was settled on her absolutely by the terms of the second settlement deed, and that neither a transfer deed was executed in favour of the daughter in relation to the shares nor a request was made to the company to transfer the shares to her name, but that, on the other hand, his name continued in the share register of the company as the holder of the shares and he also continued to receive the dividends from the shares and treat and include the same as income chargeable to tax at his hands. The Appellate Assistant Commissioner in deleting the addition was persuaded to the view that short of mutation of the register in favour of the daughter and because of the continuance of the assessee's name as the shareholder and his perception of the dividends, there was no transfer of the shares. The Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present context. " Transfer of property " has also been defined to mean any disposition, and, among other things, assignment, settlement or other alienation of property, and the expression includes the creation of a trust in property or the creation of an interest in property. A transaction entered into with the intent thereby to diminish directly or indirectly the value of one's own property and to increase the value of the properties of any other person is also within the scope of the expression. " Property " includes any interest in property, movable or immovable. But for the interaction of the provisions of the Companies Act, which we shall presently advert to, the question of transfer of the shares to the daughter as a gift presents no difficulty. Factually, the second deed of settlement is explicit that a gift of the shares was made absolutely by its maker to his daughter. No doubt a life interest had been reserved in the assessee by the earlier document, but this need not detain us because in our view all the parties concerned consented to the execution of the second settlement deed with a recital that the daughter had surrendered whatever interest she had under the earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tures of the company unless a proper instrument of transfer duly stamped and executed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any, of the transferee has been delivered to the company along with the certificate relating to the shares or if no such certificate is in existence along with the letter of allotment of the shares. The first proviso to this provision refers to a case where the instrument of transfer has been lost. An application for registration of a transfer of shares may be made under section 110(1) either by the transferor or by the transferee. Under regulation 19(1), the instrument of transfer of any share in the company shall be executed by or on behalf of both the transferor and transferee. Regulation 21 gives discretion to the board of directors, subject to the right of appeal conferred by section 111, to decline to register in certain circumstances. The effect of these provisions appears to be this. There should first be a transfer properly made of shares which should then be presented along with the share certificates to the board of directors either by the transferor or transferee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts, are in conflict. We do not think that any of the cases cited for the assessee runs counter to what we have said or establisher, that, in the absence of registration, there is no transfer of any interest at all in the shares to the transferee. Society General De Paris v. Walker related to a contest between competing transferees. Under the first transfer, the certificates of shares along with a blank transfer were deposited with the transferee as security for a debt. Later, the holder fraudulently executed a blank transfer in respect of the shares and deposited it with the appellants before the House of Lords. They filled up the blanks and presented the transfer form to the company for registration of the transfer. By the articles of association, shares could be transferred only by a deed; lost certificates might be renewed upon satisfactory proof of the loss or, in default of proof, upon a satisfactory indemnity being given. The certificates bore an endorsement that no transfer of any portion of the shares represented by the certificates would be registered until the certificate had been delivered at the company's office. The company having refused to register the transfer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 18(5) of the Income tax Act, notwithstanding his equitable right to the dividend on such shares and was not, therefore, entitled to have this dividend grossed up under section 16(2). In the course of its judgment, the Supreme Court referred to Nanney v. Morgan and quoted from it with approval the following passage : " Therefore the transferor, until the delivery of the deed of transfer to the secretary, is subject to all the liabilities and entitled to all the rights which belong to a shareholder or stockholder, and, in my opinion, until the requisite formalities are complied with, he continues to be the legal proprietor of the stock or shares subject to that proprietorship being divested, which it may be at any moment, by a compliance with the requisite formalities. " While stating that the same position obtains in India, the Supreme Court proceeded to observe: " During the period that the transfer exists between the transferor and the transferee without emerging as a binding document upon the company, equities exist between them, but not between the transferee and the company. The transferee can call upon the transferor to attend the meeting, vote according to his dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... become beneficial owners of the shares and between the dates of execution of the transfers and the registration of the transfers, the deceased could not have asserted any beneficial rights as registered holder. It was further held that the gifts of shares were completed on March 30, 1943, and on that date bona fide possession and enjoyment of the shares had been assumed by the transferees to the entire exclusion of the deceased or of any benefit to him by contract or otherwise. The Court of Appeal clearly rejected the Crown's contention that until registration on June 30, 1943, of the transfer of shares there had been no completed gift as on April 12, 1943. On the view that there had been a completed gift on that date, the Crown failed. Evershed M. R. noticed the argument of the Crown: " The Crown says that until the transfers were registered in the books of the Leweston Estates Company on June 30, 1943, either there was no effective transfer of the shares to the donee or, alternatively, there was not until that date an entire exclusion of the donor from all benefit in respect of the shares." We are not concerned in this case with the second aspect of the matter. The Master ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the terms on which the shares were held by him to make his gift effective and to divest himself of his beneficial and other interests in the shares. " With reference to the other cases noticed, it was pointed out that they all turned on the fact that the deceased donor had not done all in his power according to the nature of the property given, to vest the legal interest in the property in the donee. The following observations of Evershed M. R. are even more positive on the point : " ...... then it seems to me that it cannot be asserted on the authority of Milroy v. Lord and I venture to think it also cannot be asserted as a matter of logic and good sense or principle, that because, by the regulations of the company, there had to be a gap before Mrs. Rose could, as between herself and the company, claim the rights which the shares gave her vis-a-vis the company, the deceased was not in the meantime a trustee for her of all his rights and benefits under the shares. That he intended to pass all those rights, as I have said, seems to me too plain for argument. " Jenkins L.J., concurring with Evershed M.R., stated : " In my view, the directors of the company, when they re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egulations in the Companies Act. It may be that the physical custody of the shares, as observed earlier, continued with the assessee. But its effect will have to be assessed in the light of the recital in the settlement, deed that possession of the property settled on the daughter had been handed over to her. If the assessee received the dividends, it was because he continued to be the registered holder of the shares. If he chose to include the dividends in his income chargeable to tax, that made no difference and it could not affect the rights of the transferee under the settlement deed. Nor the fact that the shares were not included for purposes of estate duty on the death of the daughter affected her legal rights under the transfer. In our opinion, there was a completed gift of the shares to the daughter of the assessee and it operated with full force as between him and his daughter, notwithstanding that, vis-a-vis the company, he continued to be the holder of the shares in the absence of registration of the transfer. There remains the question whether what passed under the second settlement deed was only a life interest of the assessee in the shares. This aspect we have alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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