Share allotment at face value is not a transfer of company property and no deemed gift arises under gift-tax law.

Allotment of shares by a company for cash at face value does not amount to a transfer of the company's property to the shareholder, because the company is a distinct juristic person and the shareholder acquires only rights in the company, not an interest in its assets. The deemed gift provision applies only where there is an actual transfer of property for inadequate consideration. In the absence of such transfer, no deemed gift arises under section 4(1)(a) of the Gift-tax Act, 1958.

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Issues: Whether the allotment of shares by a company for cash at face value constitutes a transfer of property so as to attract deemed gift under section 4(1)(a) of the Gift-tax Act, 1958.

Analysis: A company is a juristic person distinct from its shareholders, and a shareholder does not acquire any interest in the property of the company merely by reason of share allotment. On allotment, the shareholder obtains rights in the company, including participation in profits when declared, but there is no sale or transfer of the company's property to the shareholder. The provision dealing with transfer for inadequate consideration can apply only where there is an actual transfer of property from one person to another; absent such transfer, no deemed gift arises.

Conclusion: The allotment of shares did not constitute a transfer of property and no deemed gift was chargeable under section 4(1)(a) of the Gift-tax Act, 1958.

Ratio Decidendi: Share allotment by a company does not amount to a transfer of the company's property to the shareholder, and therefore cannot be assessed as a deemed gift in the absence of an actual transfer for inadequate consideration.

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