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TMI Blog1971 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Ramesh. The execution of the gift deed was accompanied by the actual delivery of the share certificates and the blank transfer deed of the respective shares to the donee which was accepted by his mother, Smt. Parmeshwari Devi, who was his natural guardian. By the third gift deed she gif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the gift of 1,445 shares in favour of Ram Swarup and Ramesh took place in the year 1960-61, and taxed both the gifts to gift-tax in the respective years. The Gift-tax Act, 1958, came into force with effect from April 1, 1958. The assessee preferred appeals before the Appellate Assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares 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 such a case has the right to control the exercise by the vendor of the right to vote. As trustee of the shares, the vendor is also trustee of all property rights annexed to the shares. He is a trustee not only of the corpus but also of the income. He is a trustee of dividends that he may rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty 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 interest in the shares from the transferor to the transferee is independent of the requirement of its registration for purposes of the Companies Act as, without an anterior transfer, there can be no question of applying for registration of it. There should first be a transfer properly made of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withstanding 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 the shares had been delivered to the daughter. In fact, however, the physical custody of the shares continued to be with the assessee. Reference was made to section 82 of the Companies Act, which lays down that the shares or other interest of any member in a company shall be movable property transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransferor 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 applying for registration of it. It is necessary to keep in view these two aspects separately, as, otherwise, the process of arriving at a correct view as to the effect of a transfer of shares as between the transferor and the transferee is apt to be clouded. " We are, accordingly, of the opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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