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2018 (3) TMI 427 - AT - Income TaxTransfer of capital asset by a company to its subsidiary company - Long term capital gain v/s long term capital loss - whether there is a valid transfer? - Held that:- The undisputed fact is that M/s. Emami Realty Ltd is a 100% subsidiary of M/s.Emami Infrastructure Ltd, the assessee herein. M/s.Emami Rainbow Niketan Pvt. Ltd is in turn a 100% subsidiary of M/s. Emami Realty Ltd. In other words, this is a second step down 100% subsidiary of the assessee. The issue is whether the provisions of section 45(iv)(a)(b) is applicable to a second step down subsidiary. They are divergent views on this issue We prefer to follow the decision in the case of Petrosil Oil Co. Ltd [1998 (7) TMI 63 - BOMBAY High Court] we have to hold that the transaction in question cannot be regarded as transfer in view of provisions of section 47(iv) of the Act, as it is a transfer of capital asset by a company to its subsidiary company and as a second step down 100% subsidiary company is also as subsidiary of the assessee company under the Companies’ Act 1956 as the term ’subsidiary company’ has not been defined under the Income-tax Act, 1961. Hence we hold that the transaction of sale of shares of M/s. Zandu Realty by the assessee to M/s. Emami Rainbow Niketan Ltd is not regarded as a transfer in view of Sec.47(iv) of the Act. Hence, the question of computing either capital loss or capital gain does not arise. Thus, the assessee is not entitled to carry forward the capital loss of ₹ 25 crores as claimed. Therefore, the ground nos. 2 & 3 raised by the assessee in the appeal are dismissed and Ground No. 4 is allowed.
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