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TMI Blog1985 (10) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... the Registrar of Companies for getting his approval on 27-6-1977. The share certificates along with the blank transfer certificates duly signed by the transferor were handed over to the broker on 28-6-1977. The assessee did not admit any capital gains in respect of the transfer of shares on the plea that the legal transfers of the shares took place only after the close of the previous year, viz., 30-6-1977. The ITO did not accept this submission. He held that the transfer has taken place during the previous year ended on 30-6-1977 and further held that the amount of Rs. 14,40,000 deposited on 2-1-1978 will not be available for giving exemption under section 54E(1) of the Income-tax Act, 1961 ('the Act'). The only amount that was deposited during the stipulated time was Rs. 2,50,000 deposited on 23-12-1977 and, therefore, the ITO held that the assessee would get benefit of exemption under section 54E(1) on a proportionate basis with reference to that deposit alone. 11. Aggrieved, the assessee filed an appeal before the Commissioner (Appeals) contending that the transfer of shares had been taken place only when the entries were made in the registers changing the names of the shareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----- 2,14,744 1/2 --------------------------- The total number of equity shares thus agreed to be transferred is 2,14,744 1/2. All the shares were acquired by the assessee prior to 30-6-1973 except 150 shares of Highland Produce Co. Ltd. which were purchased in January 1974. The total cost of acquisition in respect of these shares came to Rs. 12,62,102.57. The total sale consideration received is Rs. 16,83,417.76. The entire consideration has been received by the assessee on 29-6-1977. The board of directors passed the resolution to transfer the shares on 27-6-1977. The blank certificates were produced before the Registrar of Companies for getting the seal affixed on 27-6-1977. The share certificates along with the blank certificates duly signed by the transferor were handed over to the broker on 28-6-1977. The issue that arises for consideration in this appeal is whether there has been a transfer within the meaning of section 2(47), read with section 45, of the Act. According to the ITO the shares are movable assets and, therefore, its transfer is guided by the Sale of Goods Act. According to the Sale of Goods Act, the transfer of a movable asset takes place as and when pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Nidhi Ltd. According to the facts appearing in that case, the assessee-company, a dealer in shares, entered into two transactions for the sale to two purchasers of certain shares which were in the custody of a bank. The transaction was entered into on 5-2-1948. Under the terms of the transactions the purchasers could take delivery of the shares by 31-3-1948 and if the purchasers did not take delivery by that date, dividends after that date were to be for their benefit but the purchasers had to pay interest on that purchase price. While dealing with this fact, the Delhi High Court held that "an agreement to transfer shares in a company accompanied with the actual instrument of transfer which had not been completed so far as the transferor could complete it did not amount to a transfer deed sufficient to cause the title to pass. By itself it would be nothing more than an enforceable agreement to convey and until the transfer endorsement was signed the shares would be unascertained goods and would not be in a deliverable state". 16. However, in Seth R. Dalmia v. CIT [1971] ILR 1 Delhi 30, the Bench accepted that the equitable ownership could pass but held that the equitable owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by the transferor to the transferee, the shares should be taken to have been transferred to the transferee, though until the transfer of shares is registered in the company's books in accordance with the company law, the transfer would not enable the transferee to exercise the rights of a shareholder vis-a-vis the company. 17. In fact, the learned counsel appearing for the assessee has given details with regard to the dates of transfer deeds and the dates on which the transfer was registered. The particulars are as under : --------------------------------------------------------------------------------------------------------------------------------------------------- Particulars Date of Transfer transfer deed registered on --------------------------------------------------------------------------------------------------------------------------------------------------- 1. Equity shares in Nelliampathy Tea 1-7-1977 4-8-1977 Produce Co. Ltd. 28-6-1977 12-8-1977 1-7-1977 19-8-1977 2. Equity shares in Highland Produce Co. 28-6-1977 3-8-1977 Ltd. 3. Equity shares in Madras Caffeine 29-6-1977 12-9-1977 Products Ltd. 4. Equity shares in Midland Rubber 29-6-1977 8-8 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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