|CORAM:||G. Manjunatha (AM), V. Durga Rao (JM)|
|SECTION(S):||2(47), 45, 48, 54EC, 54F|
|CATCH WORDS:||capital gains, exemption, transfer|
|COUNSEL:||C. Kameswara Rao|
|DATE:||December 9, 2016 (Date of pronouncement)|
|DATE:||December 23, 2016 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 2(47)/ 54EC/54F: U/s 108 of the Companies Act read with CBDT Circular No. 704 dated 28.04.1995, a mere agreement for transfer of shares does not cause effective transfer of shares unless it is accompanied with delivery of share certificate and duly signed and stamped share transfer form. An agreement to transfer share merely gives an enforceable right to the parties|
(i) The word transfer of shares is an act of the parties, i.e. transferor and transferee by which title to share is transferred from one person to another for a consideration or otherwise. Share transfer is governed by section 108 of the Companies Act, 1956. As per section 108 of the Companies Act, 1956 registration of transfer of shares is possible only if a proper transfer deed in form no. 7B duly stamped and signed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any of the transferee and has been delivered to the company along with share certificates and endorsed by the Company by changing such details in the share holder register maintained under the Companies Act. In the case of shares of listed companies, effective transfer would take place when title to share is transferred from one person to another through demat account in recognized stock exchange. In the case of shares of unlisted companies, transfer would take place, only when valid share transfer form in form no. 7B is delivered to the company and endorsed by the Company. Therefore, for effective transfer of shares a mere agreement for transfer of shares is not sufficient, unless it is physically transfer shares by delivery of share certificate along with duly signed and stamped share transfer form. The agreement to transfer share can give enforceable right to the parties, but it cannot be a valid transfer unless it is followed up by actual delivery of shares. In so far as the Ld. D.R. argument that transfer would take place when parties intended to transfer, we find that when a specific provision in section 108 of the Companies Act, 1956 is provided for dealing with transfer of shares, referring to the provisions of section 19 of the Sale of Goods Act, 1930 to define share transfer is unwarranted and uncalled for. Even, the Board, by way of a circular no. 704, dated 28-04-1995 has dealt the issue and clarified that in the case of transactions took place directly between the parties and not through recognized stock exchanges the date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer form. Therefore, we are of the humble view that there is no merit in the arguments of the Ld. D.R. that effective transfer would take place when consideration is passed between the transferor and transferee.
(ii) On facts, the assessee agreed to transfer 133420 shares for a consideration of Rs. 1,99,98,613 in pursuant of an investments agreement dated 12-08-2009 between Aquarius Capital (Mauritius) Limited and Vijay Nirman Company Private Limited and its share holders. The assessee transferred his shares on 24-11-2009 by filing valid share transfer form in form no. 7B duly stamped and signed by both the parties and presented to the Company which was endorsed on 24-11-2009. As per the said form No. 7B, the effective transfer as defined under section 2(47) of the Act, took place on 24-11- 2009 which was further supported by the letter issued by the Company wherein it was stated that share transfer form has been lodged with the Company on 24-11-2009 and actual transfer had taken place 24-11- 2009. Therefore, we are of the view that actual transfer as defined u/s 2(47) has been taken place on 24-11-2009 when valid share transfer form in form no. 7B duly stamped and signed by both transferor and transferee and presented to the Company, but not on the date of receipt of money from the buyer to the seller, i.e. On 10-09-2009. The investment agreement between Aquarius Capital (Mauritius) Limited and Vijay Nirman Company Private Limited may give a enforceable right to the parties to the agreement, but it cannot be regarded as transfer, unless individual share holders transfers their title in shares by filing share transfer form along with physical delivery of shares and endorsed by the company in the register of share holders. Since, the assessee has transferred his title in the share on 24-11-2009, transfer referred to in section 2(47) took place on the date share transfer was accepted by both transferor and transferee, i.e. 24-11-2009, but not on the date of receipt of money, i.e. 10-09-2009. Having said that the effective date of transfer took place on 24-11-2009, the other issue of investments in NHAI bonds on 4-5-2010 and purchase of house property on 31-10-2011 is well within the period of six months and 2 years from the date of transfer as specified u/s 54EC and 54F of the Act, and accordingly, the assessee is eligible for exemption and thus, there is no prejudice is caused to the revenue from the order of the A.O. within the meaning of section 263 of the Act. Therefore, the CIT was incorrect in assuming jurisdiction to review the assessment order.