Ajay Jain
(Advocate)
(83 Points)
Replied 23 October 2007
Hi Rashmi
actly its not given any clear cut idea
Suppose business is transferred from holding co. to subsidiary co. in 2002. subsidiary co. is 100% subidiary of Holding co.
now holding co. sold 40% shares to others it means it ceases to hold whole of the share capital of the subsidiary co.
question is THE TRANSFER WHICH TOOK PLACE IN 2002 WAS EXEMPT BECAUS OF SECTION 47 BUT SUBSEQUENTLY EXEMPTION IS WITHDRAWL BECAUSE OF SECTION 47A. NOW WHO IS LIABLE TO PAY TAX ON THAT TRANSFER WHICH TOOK PLACE IN 2002 EITHER HOLDING CO OR SUBSIDIARY CO.
these section not giving any clear idea actly.
A case particularly relevant to the present case is that of The Asst. CIT
Vs. Prime Securities Ltd. (2005) 96 TTJ (Mum) 553 wherein the court held that exemption will be withdrawal where the Holding Company cease to hold the whole share capital of the Company. The relevant portion of the judgement is extracted below.
3. . . . . . . Next the Assessing Officer noted that in the return of income filed on 15/10/92 the assessee had claimed an exemption of Rs. 2,04,99,060 Under Section 47(v) on sale of capital assets to the holding company- M/s. Great Eastern Shipping Ltd., which had owned the 100% shares of the assessee company. In March 1992, the assessee company had issued 6,50,000 shares to various persons which resulted in reducing the holding of M/s. Great Eastern Shipping Co. Ltd, from 100% to 43%. Therefore, the exemption of Rs. 2,04,99,060 being gain on sale of capital assets was required to be withdrawn in accordance with the provisions of Section 47A of the Act. When this point was raised by the learned Assessing Officer during the course of assessment proceedings the assessee admitted that provisions of Section 47A certainly came into the play but the correct procedure was to grant the assessee first an exemption Under Section 47(v) in the assessment order Under Section 143(3) and then withdraw the same by way of rectification order Under Section 155(7B). The learned Assessing Office did not accept this argument. The fact of desubsidiarisation was found out by the department after making independent inquiry on its own. He also noted that there was an interim stay granted by the Hon'ble Bombay High Court against the notice Under Section 155(7B). The learned Assessing Officer noted that the desubsidiarisation had already taken place on 27/3/92 at the time when the original return of income was filed on 15/10/92. Hence the facts were within the knowledge of the assessee company at the time of filing the return of income and it was obligatory on the part of the assessee company to withdraw the exemption Under Section 47(v) in view of the provisions of Section 47A. The Assessing Officer therefore brought to tax the amount of long term capital gain of Rs 2,04,99,060 and allowed the assessee deduction Under Section 48(2) @ 30% and assessed the balance amount of Rs. 1,43,49,342.
23. . . . . . . In view of the discussion in the foregoing paragraphs we hold that the Assessing Officer was justified while making order Under Section 143(3) to estimate Capital gain under the provisions of Section 47A. He was also justified in levying interest Under Section 234B.
24. . . . . . . . In the result, we allow Revenue's appeal in ITA 5639/Bom/95 while the assessee's appeal in ITA 5351/Bom/95 is only partly allowed. The assessee's appeal in ITA No. 4241/Mum/97 is dismissed.
if there any other judgement then plz send the same to me
thx nd regards
Atul
CAclubindia
