Bonus-share rights and quoted-share valuation must follow record date and recognised exchange quotation rules.

Bonus shares are not treated as part of transferred property unless they have come into existence by allotment and the relevant record date; a mere resolution to issue them does not create an existing bonus-share right. On that basis, no bonus-share value is added to a deemed gift where the share transfer occurred before the record date. For quoted shares, valuation must follow the quotation of the recognised stock exchange evidenced by the statutory certificate, and that certificate is conclusive as to quoted status. The nearest quotation from another exchange cannot replace the accepted exchange quotation when the recognised exchange quotation is available.

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Issues: (i) Whether, on the date of transfer of the shares, there existed any right to receive bonus shares so as to include such right in the value of the deemed gift; (ii) Whether the value of the quoted shares for purposes of deemed gift had to be taken on the basis of the Ahmedabad Stock Exchange quotation or the Bombay Stock Exchange quotation.

Issue (i): Whether, on the date of transfer of the shares, there existed any right to receive bonus shares so as to include such right in the value of the deemed gift?

Analysis: Transfer of shares, for the purpose of rights between transferor and transferee, is complete when the share certificates and transfer forms are handed over, and not when registration later takes place. Bonus shares do not come into existence merely because a resolution to issue them is passed; they come into existence only on allotment and on the relevant record date. Until that point, there is no separate, identifiable bonus-share asset capable of being treated as transferred property. On the facts, the transfers took place before the record date, so no existing bonus-share right was embedded in the transferred shares.

Conclusion: The right to bonus shares was not required to be added to the value of the deemed gift, and the issue is decided in favour of the assessee.

Issue (ii): Whether the value of the quoted shares for purposes of deemed gift had to be taken on the basis of the Ahmedabad Stock Exchange quotation or the Bombay Stock Exchange quotation?

Analysis: For quoted shares, the valuation rule requires the quoted value on the date of gift, or failing that, the nearest preceding quotation. The statutory definition of quoted share treats a certificate from the concerned stock exchange as conclusive on the question whether the share is quoted on that exchange. Since the assessee produced the Ahmedabad Stock Exchange certificate, the revenue could not ignore it and resort to the Bombay Stock Exchange quotation. The nearest-exchange principle could not override the conclusive effect of the stock-exchange certificate in the presence of a recognised exchange quotation in the State.

Conclusion: The valuation had to be based on the Ahmedabad Stock Exchange quotation, and the issue is decided in favour of the assessee.

Final Conclusion: Both questions were answered against the revenue and in favour of the assessee, leaving no infirmity in the Tribunal's decision.

Ratio Decidendi: Where bonus shares have not come into existence by the relevant record date, no transferable bonus-share right is included in the original share transfer; and where a recognised stock exchange certificate conclusively establishes quoted status, valuation must follow that exchange's quotation rather than a quotation from another market.

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