These are appeals, one by assessee and another by department. 2. assessee, out of natural love and affection, made gift of 495 equity shares of Rs. 100 each in Shri Krishna Bottlers (P.) Ltd. on 13-9-1976, to his minor son Master Amarjit Singh aged 17 years 11 months and 18 days, his date of birth being 27-9-1958. assessee was served with notices under section 13(2) and also under section 16(1) of Gift-tax Act, 1958 ('the Act'). In compliance assessee filed nil return stating that there was no gift involved. He relied on decision of Andhra Pradesh High Court in Smt. Valluri Janakamma v. CGT [1967] 66 ITR 255. GTO worked out market value of shares at Rs. 321 per share in accordance with rule 10(2) of Gift-tax Rules, 1958 ('the Rules') and, thus, assessee was assessed on total gift of Rs. 1,58,895. assessee carried on matter in appeal to AAC. Before him, it was contended that transaction is void ab initio. minor son had signed share transfer application form which in law h e is not permitted to do. Though company has acted on application presented by both parties, viz., transferor who is major and transferee who is minor, still, in view of incapacity of minor to enter into contract under section 11 of Indian Contract Act, 1872, no gift was involved and transaction was void ab initio. Realising that transaction is invalid transaction, minor reconveyed shares to father subsequently. Alternatively, it was pleaded that even if transaction amounted to gift, value of gift was worked out by GTO on basis of break-up value according to rule 1DD. assessee pleaded for yield method of valuation of unquoted equity shares in view of decision of Supreme Court in CGT v. Smt. Kusumben D. Mahadevia [1980] 122 ITR 38. AAC rejected contention of assessee that no gift was involved. He held that minor had in fact received gift of shares from his father. He has also remarked that minor in this case being represented by his mother and natural guardian, transfer is perfectly valid. He rejected contention of assessee that transaction is invalid in view of provisions of section 11 because this is not case of contract but rather case of gift. There is nothing in law to prevent minor from acquiring or holding shares in joint stock company. On above premises, he did not accept contention of assessee that there was no gift. As for reconveyance of gifted shares to father subsequently, he felt that it was collusive transaction. As regards valuation of shares, he partially accepted contention of assessee that shares should be valued for purposes of gift-tax on basis of yield method in view of pronouncements of Supreme Court in case cited supra. He directed GTO to take average of value under break-up value method and yield method. 3. assessee is aggrieved over finding of AAC that first transaction is which assessee gave certain shares to his minor son amounted to gift. department is aggrieved over direction of AAC to take average of break-up value and value as determined on yield basis. 4. Before us, Shri V. Ramakrishna Rao, learned representative of assessee, repeated contentions raised before AAC. It was vehemently contended that as minor had signed shares transfer form, that document is invalid document in view of incapacity of minor to enter into contract. Therefore, even if company had acted on said document by transferring shares in favour of minor, that was again invalid act and, therefore, no gift arose when assessee gave these shares to his minor son. In point of fact, it was argued that because assessee realised that transaction was void ab initio, shares were retransferred subsequently and remark of learned AAC that it was collusive transaction is most unwarranted in circumstances of case. assessee's representative relied on decision of Rajasthan High Court in Malu Khan Lalu Khan v. CIT [1986] 157 ITR 457, for proposition that transfer application form filed by minor was totally void ab initio. In support of his plea that gift of shares by father to his minor son was invalid transaction, he relied on decision in case of CGT v. R. Alagiriswamy [1977] 108 ITR 672 (Mad.), and also decision of Andhra Pradesh High Court in Smt. Valluri Janakamma's case. He took us through provisions of articles of association of company, particularly clauses 18 and 19 thereof, and submitted that unless share transfer application form was executed by persons competent to contract, company cannot validly act on same. Even if it had acted, it would be company cannot validly act on same. Even if it had acted, it would be illegal and not binding. Therefore, he contended, gift was invalid gift. 5. Shri Ramakrishna Rao objected to remarks of AAC that minor was represented by his mother and natural guardian. In this context, he referred to share transfer application form (pages 7 and 8 of paper book) in which assessee had signed as transferor and minor has signed as transferee, and therefore, there was no basis for observation of AAC that minor was represented by his mother. Without prejudice to above, he submitted that AAC ought to have applied yield method for valuation of shares. 6. Shri N. Santhanam, learned departmental representative, relied on orders of authorities below. It was his plea that shares had been validly gifted by father who is major and no contract is involved in matter of gift. In this case, as assessee, who is donor, himself happened to be father and natural guardian, there was no need for acceptance of gift. gift is complete moment shares were delivered along with transfer form by father and guardian. It may be that share transfer application was signed inadvertently by minor. But, that will not make that document invalid one. Even assuming it is invalid document, company had acted on share transfer applications presented by donor and donee and had in fact transferred shares in name of minor son. Thus, as matter of fact, complete formalities have been gone through and minor son has become legal owner of shares. Even otherwise, gift is complete because gift has emanated from father and natural guardian and one of signatures in transfer form was that of father and natural guardian who is also managing director of company. Therefore, he submitted that gift-tax was rightly levied. As regards direction of AAC about averaging of values by two known methods, Shri Santhanam submitted that such direction is not sanctioned by decision of Supreme Court cited supra. 7. Having regard to rival submissions and materials on record, we have n o hesitation in upholding order of AAC on point that there was completed gift exigible for gift-tax. donor in this case is father of minor son and he is major. status of donor is that of individual. Therefore, he is perfectly entitled to dispose of his property in any manner he liked. He made gift of his shares in instant case. There is no invalidity about his action in gifting shares. gift was in favour of his minor son. donor himself happens to be father and natural guardian. So, there is no need for minor to accept gift as gift had been made by father and natural guardian himself who is only person competent to act on behalf of minor. assessee's representative relied on decisions of Andhra Pradesh High Court and Madras High Court cited supra. These decisions cover cases involving immovable properties of joint family and, therefore, held to be void ab initio. shares in question in case before us do not belong to any joint family and they originally belonged to assessee who is individual. Therefore, we reject his contention. 8. Another contention is that minor has subscribed his signature to share transfer form in column against 'transferee' and as minor is incompetent to contract under section 11 share transfer form presented to company suffered from incurable informity and, therefore, even though company acted on said share transfer application presented by both transferor (the assessee father) and transferee (the minor son), transaction is illegal one and void ab initio. In this connection, assessee relies on clauses 18 and 19 of articles of association of company and also decision of Rajasthan High Court in Malu Khan Lalu Khan's case. That was case in which minor was shown as major for purpose of securing excise contract and he had given bid in auction to obtain licence for country liquor in violation of provisions of Excise Act and Rules thereunder provisions of Contract Act. action of ITO was upheld in having cancelled registration of firm in which minor was admitted to benefits of partnership. facts of this case are not on all fours with facts of case before. We are unable to persuade ourselves to accept arguments of learned representative of assessee. articles of association of company provide rules of indoor management and persons dealing with company are deemed to have constructive knowledge of provisions of memorandum of association and articles of association of company. Clauses 18 and 19 of articles of association are as follows: " 18. instrument of transfer of any share shall be in form prescribed by Companies Act, 1956, and shall fulfil relevant requirements of Companies Act, 1956, regarding signature, authentication, period within which such instruments should be presented to company, etc. 19. Every such instrument of transfer shall be executed both by transferor and transferee and attested and transferor shall be deemed to remain holder of such share until name of transferee shall have been entered in Register of Members in respect thereof. " What is all intended in above two clauses is that share transfer form should be executed both by transferor and transferee and should be signed and presented within period prescribed under Companies Act, 1956. In this case also, share transfer form and duly signed by father and minor son in capacity of transferor and transferee, respectively. While persons dealing with company are deemed to have constructive knowledge of provisions of memorandum and articles of association of company, t h e company cannot be presumed to have constructive knowledge of capacity or competency of persons who are signing transfer forms. So, in case where minor, without disclosing that he is minor, signed document and company has acted on same in good faith, how can minor later on avoid transaction by putting plea that he is minor? This apart, assessee, who is father and natural guardian, has subscribed his signature as transferor. He also happens to be managing director of company. Even if minor had signed concerned share transfer form in his capacity as transferee, inasmuch as minor can act only through his guardian (in this case father and natural guardian) and said guardian had subscribed his signature in transfer form though as transferor, and inasmuch as said guardian as managing director had participated in meeting of board of directors approving transfer, we fail to see any force in contention of assessee that because minor had subscribed his signature, in circumstances of case, transfer made by company should be held invalid. Even if it is held that transfer of shares in favour of minor effected by company in its books is invalid, there is no denying fact that there was transfer anterior to transfer in books of company and this anterior transfer was done by father when he made gift of these shares by delivery of scrips. So, one and same person in his capacity as donor has given delivery of share certificates and in his capacity as father and natural guardian of minor took delivery of share certificates. At this point itself, gift is complete and provisions of Act are attracted. 9. In CIT v. Smt. Suraj Bai [1972] 84 ITR 774 (Raj.), it was held: " Gifts of shares of companies are complete for purpose of Gift-tax Act on date of delivery of share certificates along with transfer deeds to donees, though he dates of registration of shares in names of donees in register of company is later. gift is complete when beneficial interest in shares is transferred from donor to donee. " In that case, one Smt. Suraj Bai executed three unregistered gift deeds on 26-11-1956. By these gift deeds, she gifted certain shares to her grandsons who were minors and to her daughter-in-law. On 3-7-1957, she executed three fresh registered gift deeds confirming gifts made on 26-11-1956 in respect of aforesaid shares in favour of same donees. question was when did these gifts take place? Rajasthan High Court referred to decision of Bombay High Court in E.D. Sassoon & Co. Ltd. v. K.A. Patch [1943] 45 Bom. LR 46, and also quoted with respect observations of their Lordships in R. Mathalone v. Bombay Life Assurance Co. Ltd. [1954] 24 Comp. Cas. 1 (SC) as follows: " On transfer of shares, transferee becomes sole beneficial owner of those shares sold by transferor, legal title to which is vested in him. Thus, relation of trustee and cestiui que trust is thereby established between them. transferor holds shares for benefit of transferee to extent necessary to satisfy demands of section 94, Trusts Act, 1882. As transferee holds whole beneficial interest and transferor has none, transferor must comply with all reasonable directions that transferee may give. In this situation if he becomes trustee of dividends he is also trustee of right to vote because right to vote is right to property annexed to shares and as such beneficiary has right to control exercise by trustee of right to vote. relationship arises by reason of circumstance that till name of transferee is brought on register of shareholders in order to bring about fair dealing between transferor and transferee, equity clothes transferor with status of constructive trustee and this obliges him to transfer all benefits of property rights annexed to sold shares of cestui que trust. " High Court also referred to decision of Madras High Court in R. Subba Naidu v. CGT [1969] 73 ITR 794 wherein it was held that transfer of interest in shares from transferor to transferee is independent of requirement of its registration for purposes of Companies Act as without anterior transfer there can be no question of applying for registration of it. High Court then came to conclusion that gifts were completed within meaning of term in Act on 26-11-1956 when share certificates were delivered to donees. Applying ratio of decision of Rajasthan High Court cited supra, we have no hesitation in holding that gift was complete when father delivered as possession as donor and took possession of share certificates as father and natural guardian. Therefore, we reject contention of assessee that because share transfer application was signed by minor, transaction was void ab initio. There is no invalidity in gift on facts and in circumstances of case and contention of assessee fails. 10. As matter of fact, from affidavits filed before us, it is seen that assessee had proposed transfer of 495 equity shares bearing distinctive numbers 11806 to 12300 and had addressed letter to company in August 1976 and company directed him to lodge share transfer forms which he had forwarded on 15-9-1976 duly signed by him and by his son. Therefore, we find no support for remarks of AAC that minor was represented by his mother and we uphold objection of assessee to this remark. This affidavit does not materially alter our conclusions. Rather, it reinforces our view in that assessee had taken every step to get transfer of shares registered thereby revealing his intention to give effect to gift made by him in accordance with provisions of Companies Act. May be, in application form infirmity has crept in that minor has signed share transfer form but in view of decision of Rajasthan High Court cited supra, it does not stand in way of our holding that there was completed gift moment delivery of possession of shares took place. donor himself being father and natural guardian, took possession of shares on behalf of minor. 11. department in its appeal has questioned direction of AAC t o take average of values as obtained by break-up value method and yield method. This is valid objection. In Sint, Kusumben D. Mahadevia's case Supreme Court held at page 47 that combination of two methods (yield method and break-up value method) advocated on behalf of revenue (in that case) has, thus, no sanction or of any judicial or other authority and cannot be accepted as valid principle of valuation of shares. Therefore, AAC erred in directing GTO to take meaning of two values. 12. This leaves us with main question whether value of shares for purposes of gift-tax should be by break-up value method alone, in view of provisions of rule 10(2). Rule 10(2) is as follows: " (2) Where articles of association of private company contain restrictive provision as to alienation of shares value of shares, if not ascertainable by reference to value of total assets of company, shall be estimated to be what they would fetch if on date of gift they could be sold in open market on terms of purchaser being entitled to be registered as holder subject to articles, but fact that special buyer would for his own special reasons give higher price than price in open market shall be disregarded. " In case of Smt. Kusumben D. Mahadevia, Supreme Court declined to consider question whether valuation of shares should have been made for purpose of gift-tax on basis of break-up value method by reason of rule 10(2) as it did not arise out of order of Tribunal. So, this case will not come to rescue of revenue. These are unquoted equity shares and their market value as on date of gift has to be ascertained. In case of Seth Hemant Bhagubhai Mafailal v. N. Rana Iyer, GTO [1983] 144 ITR 737, Bombay High Court, after considering rule 10(2) in juxtaposition with section 6(1) of Act and after referring to Mahadeo Jalan's case and after considering import of words 'if sold in open market' occurring in section 6(1), held that it is only profit-earning method (yield method) which can be properly applied for valuation of unquoted equity shares. In this case, assessee has not valued his shares in accordance with rule 10(2). In fact, he had submitted nil return on plea that there was no gift involved. It is GTO who had applied rule 10(2). Before applying rule 10(2), it is incumbent on his part to state reasons why provisions of section 6(1) are not applicable to instant case. This he has not done. assessee has taken up question of valuation even before AAC and insisted that without prejudice to his claim that there is no gift, only relevant method of valuation is yield method in circumstances of his case. We uphold his contention that shares for purposes of gift-tax have to be valued on basis of yield method and we reject contention of revenue in this behalf. 13. Though no specific ground of appeal was taken before us as regards valuation, assessee had argued for yield method in his capacity as respondent in departmental appeal. As AAC's order is not in consonance with pronouncement of Supreme Court in case cited supra, we have t o interfere with his order even though no specific ground was raised by assessee in his appeal before us. Therefore, we set aside direction of AAC to take mean of two values and restore case to file of GTO with direction that he will adopt yield basis for valuing shares for purposes of gift-tax after affording reasonable opportunity to assessee to state his submissions. 14. In result, assessee's appeal is dismissed and departmental appeal is treated as allowed for statistical purposes. *** HARBHAJAN SINGH v. GIFT TAX OFFICER