ALLOTMENT OF SHARES CANNOT BE TREATED AS GIFT

The Supreme Court has ruled that Khoday Distilleries Ltd. was not liable to pay gift tax on the allotment of rights issue to its shareholders following a board resolution. The decision of the Karnataka High Court to the contrary was set aside on the appeal of the company. The allotment, said the Supreme Court, meant creation of shares and did not amount to transfer. The judgment also remarked that the tax department has "messed up the entire case", and had no clear focus on the invocation of income tax, gift tax, wealth tax.