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Issues Involved:
1. Whether there was any taxable gift of the 208 "B" shares and 8 "A" shares in Palani Andavar Mills for the assessment year 1959-60. 2. Whether, in any event, the value of the property gifted should not be restricted to the life interest of the donor in the said shares as on March 31, 1959. Detailed Analysis: Issue 1: Taxable Gift of Shares The central issue was whether the inclusion of Rs. 38,880 for gift-tax, representing the value of 208 "B" shares and 8 "A" shares held by the assessee in Udumalpet Palani Andavar Mills Limited, was proper. The assessee argued that there was no actual transfer of the shares to his daughter, despite two settlement deeds dated April 1, 1951, and March 31, 1959, which purported to make an absolute gift of the shares to her. The shares remained registered in the assessee's name, he continued to receive dividends, and no transfer deed was executed or request made to the company to transfer the shares to his daughter's name. The Tribunal disagreed with the Appellate Assistant Commissioner, who had deleted the addition on the grounds that there was no transfer of the shares without mutation of the register in favor of the daughter. The Tribunal held that the assessee had done everything in his power to divest himself of his title to the shares, constituting a completed gift to his daughter. The court considered the definitions under the Gift-tax Act, 1958, which included the transfer of property as any disposition, assignment, settlement, or other alienation of property. The second settlement deed explicitly stated that the shares were given absolutely to the daughter, and she had surrendered any interest under the earlier settlement to allow a revised disposition. The court concluded that the second settlement deed complied with the requisites for a valid transfer of movable property under Section 123 of the Transfer of Property Act. Despite the shares' physical custody remaining with the assessee, the transfer was valid as between the transferor and transferee, and the daughter had assumed possession of the shares. Issue 2: Value of Property Gifted The assessee contended that the value of the property gifted should be restricted to his life interest in the shares as on March 31, 1959. The court noted that the first settlement deed retained a life interest in the assessee, but the second settlement deed, executed with the consent of all parties, including the daughter, transferred the entire interest in the shares to her. The court referenced several cases to support its decision, including Societe Generale De Paris v. Walker, Milroy v. Lord, and Howrah Trading Co. Ltd. v. Commissioner of Income-tax, which dealt with the transfer of shares and the necessity of registration under the Companies Act. The court emphasized that the transfer of shares as between the transferor and transferee was valid and complete upon execution of the transfer deed, even if the registration in the company's books was pending. The court also cited Rose, In re: Rose v. Inland Revenue Commissioners, which held that a transferor who had done everything in his power to transfer shares had effectively transferred his legal and beneficial interest, making the transferee the beneficial owner. The court concluded that the second settlement deed of March 31, 1959, constituted a completed gift of the shares to the daughter, and the value of the property gifted should not be restricted to the life interest of the donor. Conclusion: The court answered both questions under reference against the assessee, affirming that the inclusion for gift-tax purposes of the total value of the shares as on March 31, 1959, was correct. The gift of the shares was complete and valid as between the assessee and his daughter, and the value of the property gifted included the entire interest in the shares. The assessee was ordered to pay costs, with counsel's fee set at Rs. 250.
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