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TMI Blog1968 (11) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 ; but the shares were not treated as part of her estate for estate duty. HL case, which was not 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 snares 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The definition includes certair deemed gifts with which we are not concerned in the present context". Transfer of property "has also been denned 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 recit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the share until the name of the transferee is entered in the register of members in respect thereof. Section 108(1) is to the effect that a company shall not effect a transfer of shares in or debentures 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 Ml, to decline to register in certain circumstances. The effect of these provisions appears t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ownership as distinguished from legal ownership of the shares, but it seems to us that, in practical application, the distinction may not be of much consequence unless equities, as between the claimants, are in conflict. We do not think that any of the cases cited for the assessee runs counter to what we hive said or establishes that, in the absence of registration, there is no transfer of any interest at all in the shares to the transferee. Societe Generate De Paris v. Walker [1886] 11 App. Crs. 20, 30 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the precise point which we are called upon to decide in this reference and what was held was only that a person who had purchased shares in a company under a blank transfer and in whose name the shares have not been registered in the books of the company, was not a shareholder in respect of such shares within the meaning of section 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 [1888] 37 Ch. D. 346 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 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ped subsquently on April 12, 1943, and were only registered in the books of the company on June 30, 1943. In the mea mime the deceased had died on February 16, 1947. The Crown claimed estate duty on the shares on the ground that the gift of the shares was not completed before April 10, 1943, and that was the point the Court of Appeal had to decide. It held that the deceased having done everything in his power by executing the transfers to transfer his legal and beneficial interests in the shares to the transferees, they had 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted gift of the shares as between the transferor and the transferee, and the other its effect vis-a-vis the company, and the learned judge held the view that, as between the parties to the transfer, it operated as a compelete and immediate gift. He also noticed Milroy v. Lord [1862] 31 LJ. Ch. 798; 4 De G.F. J. 264 but distinguished it by pointing out: "It is plain that the basis on which they so decided was that this purported gift was incomplete or imperfect in this sense, that the donor had not done all that lay in his power to do in accordance with 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 [1862] 31 L.J. Ch. 798; 4 De G.F. J. 264 and I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was this further significant remarks : "After all, where duty is concerned, the only relevant type of ownership is beneficial ownership, and the situation of the legal estate does not affect the question". We have taken the liberty of extracting extensively from Rose, In re : Rose v. Inland Revenue Commissioners [1952] Ch. 499 the only excuse being that it seems to provide a complete answer to the reference against the assessee. The registered settlement deed of March 31, 1959, substantially complied with the requisites of the form of transfer prescribed by the articles of association of the company or the regulations 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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