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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 the value of the property gifted should be restricted to the life interest of the donor in the said shares as on March 31, 1959. Issue-wise Detailed Analysis: 1. Taxable Gift of Shares: The primary issue was whether the inclusion of Rs. 38,880 for gift-tax was proper, representing the total value of 208 "B" shares and 8 "A" shares held by the assessee in Udumalpet Palani Andavar Mills Limited. The shares were registered in the name of the assessee, who received dividends and included them in his taxable income. The value was added to his return for gift-tax purposes based on two settlement deeds dated April 11, 1951, and March 31, 1959, which purportedly transferred the shares to his daughter. The Tribunal found 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 noted that under section 3 of the Gift-tax Act, 1958, gift-tax is payable for gifts made voluntarily and without consideration. The second settlement deed explicitly stated that a gift of the shares was made absolutely to the daughter. Despite the life interest retained in the first settlement deed, all parties consented to the second settlement deed, which was compliant with section 123 of the Transfer of Property Act. The court concluded that there was a valid transfer of the shares to the daughter, constituting a gift. 2. Registration of Shares and Valid Transfer: The assessee contended that without registration of the shares in the company's books in the daughter's name, there was no valid transfer. The court examined section 82 of the Companies Act and relevant case law, including Societe Generate De Paris v. Walker, Milroy v. Lord, and Howrah Trading Co. Ltd. v. Commissioner of Income-tax. The court found that while the transferor remains the holder of the shares for company purposes until registration, the transfer of interest in the shares can be valid between the transferor and transferee without registration. The court cited Rose, In re: Rose v. Inland Revenue Commissioners, which held that a transferor who has done everything in his power to transfer shares creates a valid gift, even if registration is pending. 3. Life Interest vs. Entire Interest: The court addressed whether the gift comprised only the life interest of the assessee. It noted that the first settlement deed retained a life interest but was not in the form requisite for a valid transfer of shares. The second settlement deed, executed with the consent of all parties, transferred the entire interest in the shares to the daughter. The court concluded that the second settlement deed effected a complete transfer of the shares. Conclusion: The court held that the inclusion of the total value of the shares for gift-tax purposes was correct and answered both questions against the assessee. The court affirmed that there was a completed gift of the shares to the daughter, notwithstanding the lack of registration in the company's books. The transfer under the 1959 settlement deed was of the entire interest in the shares, not just the life interest. The assessee was liable for the gift-tax on the full value of the shares as of March 31, 1959.
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