Completed share transfer can be a taxable gift even without company register entry; full value assessed, not just life interest.

A registered settlement deed transferring shares, accepted by the daughter, was treated as a completed gift under the Gift-tax Act, 1958 because the donor had done everything necessary to divest title. Non-entry of the transfer in the company's register did not prevent completion of the transfer inter partes, as company registration affects recognition by the company rather than the validity of the gift between the parties. The later deed also superseded any earlier life-interest reservation and conveyed the entire beneficial interest in the shares. Accordingly, the taxable value was not limited to the donor's life interest but extended to the full value of the shares.

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Issues: (i) whether the shares were the subject of a taxable gift under the Gift-tax Act, 1958; (ii) whether, if a gift existed, its value was confined to the donor's life interest or extended to the full value of the shares.

Issue (i): whether the shares were the subject of a taxable gift under the Gift-tax Act, 1958.

Analysis: A gift under section 3 of the Gift-tax Act, 1958 is a voluntary transfer of existing property without consideration. The second settlement deed was a registered instrument signed by the donor and accepted by the daughter, satisfying section 123 of the Transfer of Property Act, 1882 for transfer of movable property. The Court treated the transfer of shares as complete between the parties once the donor had done everything in his power to divest himself of title, even though the company's register was not updated. Registration under the Companies Act, 1956 affects the company's recognition of the shareholder, but does not prevent a completed transfer inter partes. The authorities relied on by the assessee were distinguished because they concerned imperfect transfers or disputes with the company or competing transferees.

Conclusion: The shares were validly transferred and the transfer constituted a taxable gift; the finding was against the assessee.

Issue (ii): whether, if a gift existed, its value was confined to the donor's life interest or extended to the full value of the shares.

Analysis: The first settlement deed reserved a life interest, but the later registered settlement deed, executed with the daughter's consent and surrender of her earlier interest, effected a revised disposition of the shares absolutely in her favour. The earlier reservation could not control the later complete transfer, and the transaction conveyed the entire interest in the shares rather than a bare life interest. The continued receipt of dividends by the donor, while he remained the registered holder vis-a-vis the company, did not alter the beneficial effect of the later settlement deed.

Conclusion: The taxable value was not restricted to the donor's life interest and included the full value of the shares; the finding was against the assessee.

Final Conclusion: The reference was answered in favour of the revenue, holding that there was a completed taxable gift of the shares and that the assessable value was the full value of the shares, not merely the donor's life interest.

Ratio Decidendi: A transfer of shares can constitute a completed gift between transferor and transferee once the donor has executed the requisite transfer and done all that lies in his power to divest himself of title, and lack of registration in the company's books does not prevent the gift from being complete for tax purposes.

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