Share allotment is not a conveyance for stamp duty when a company issues shares for the first time.

A form filed under Section 104 of the Indian Companies Act for allotment of fully paid shares otherwise than in cash was not a conveyance chargeable to stamp duty, because the company's issue of shares for the first time did not involve a transfer of existing property to the allottee. The court treated shares as property in the hands of a shareholder, but held that the company itself was not transferring property by making the allotment. The form was therefore correctly treated as an agreement, and stamp duty as on a conveyance was not exigible.

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Issues: Whether a form filed under Section 104 of the Indian Companies Act in relation to the allotment of fully paid shares otherwise than in cash amounted to a conveyance chargeable to stamp duty; and whether the issue of shares by a company constitutes a transfer of property for the purpose of the Stamp Act.

Analysis: Section 104 of the Indian Companies Act contemplates filing of the prescribed particulars where fully paid shares are allotted otherwise than in cash and the document is to bear the stamp duty applicable to the underlying contract. The decisive question was whether the company, when issuing shares for the first time, can be said to transfer property to the allottee. A share is property in the hands of a shareholder, but the company itself is not to be treated as holding its own shares in the sense required for a transfer of property. The issue of shares by allotment does not amount to a conveyance, because there is no transfer of existing property by the company to the recipient. In the circumstances, the argument based on sale of goods principles was unnecessary to decide.

Conclusion: The form filed under Section 104 did not amount to a conveyance and was correctly treated as an agreement. The determination was in favour of the assessee.

Final Conclusion: The legal effect of the decision is that stamp duty as on a conveyance was not exigible on the particulars filed under Section 104 for the allotment of shares, since the transaction was not a transfer of property by the company.

Ratio Decidendi: The first issue allotment of shares by a company, when issuing them for the first time, is not a transfer of property and therefore does not constitute a conveyance for stamp duty purposes.

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