TMI Blog1971 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... Gift-tax Act on the date of the delivery of share certificates along with transfer deeds to the donees or on the dates of registration of shares in the names of the donees in the register of the company ?" The facts are these. Smt. Suraj Bai, assessee, executed 3 unregistered gift deeds on November 26, 1956. By the first gift deed she gifted 735 shares of the Maharaja Salt Works Co. Ltd. to her minor grandson, Ram Swarup. The execution of the gift deed was accompanied by the actual delivery of share certificates of 735 shares and blank transfers. Smt. Parmeshwari Devi accepted the gift on behalf of her minor son, Ram Swarup. By the second gift deed she similarly gifted 710 shares of the aforesaid company to her second minor grandson, Rame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of these two sets of shares should be sent to the company. On April 10, 1958, Smt. Parmeshwari Devi complied with the request of the company and forwarded fresh transfer deeds in respect of two sets of shares. The transfer deed in respect of 300 shares was signed by the assessee and that in respect of 700 shares by the assessee as well as by Shyam Sunder. On February 1, 1959, 735 and 710 shares were registered in the names of Ram Swarup and Ramesh, respectively. Earlier on May 9, 1958, 1,000 shares were registered in the name of Smt. Parmeshwari Devi in the books of the company. On the above facts the Gift-tax Officer held that the gift of 1,000 shares in respect of Smt. Parmeshwari Devi took place in the assessment year 1959-60 while t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the buyer. The above decision was followed by the Bombay High Court in E. D. Sassoon Co. Ltd. v. K. A. Patch. It was held that a share in a joint stock company is capable of equitable assignment and can be the subject of a trust. It was further held that a shareholder who sells his shares in a joint Stock company and hands over the share certificates and transfer forms to the purchaser but the company refuses to transfer them, occupies the position of a constructive trustee of the shares for the purchaser. The legal title to the shares still remains in the vendor although the beneficial interest is transferred to the purchaser ; and the vendor must comply with all reasonable directions that the purchaser may give. The purchaser in suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance that till the name of the transferee is brought on the register of shareholders in order to bring about a fair dealing between the transferor and the transferee, equity clothes the transferor with the status of a constructive trustee and this obliges him to transfer all the benefits of property rights annexed to the sold shares of the cestui que trust." In Howrah Trading Co. v. Commissioner of Income-tax it was held that it is the right of a transferee of a share to call upon the company to register his name and the entering of the name of the transferee in the register of members relates back to the time when the transfer was first made. In R. Subba Naidu v. Commissioner of Gift-tax it was held as follows : " The transfer of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had done everything in his power to divest himself of title to the shares, there was a completed gift thereof to his daughter. On a reference, the High Court held that there was a completed gift of the shares to the daughter which operated with full force between the assessee 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. It will be noticed that in the above case the gift was held to have been completed by execution of a registered deed of settlement as provided by section 123 of the Transfer of Property Act. This deed was signed by the daughter in token of her acceptance of the gift. It was recited in the deed that possession over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained in Table " A " in Schedule I of the Companies Act the learned judges held : " 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 for change of registration in respect of them and, until such a change is effected in the books of the company, the transferor will continue to be the holder of the shares. The transfer of the interest in the shares from the transferor to the transferee appears, therefore, to be independent of the requirement of its registration for purposes of the Companies Act. Without an anterior transfer there can be no question of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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