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2013 (9) TMI 972 - MADRAS HIGH COURTApplicability of Gift tax on transfer of shares to 100% subsidiary company – Held that:- Under Section 47(iv) of the Income Tax Act, for the purpose of capital gains, the transfer of capital asset between the holding company to subsidiary company is not treated as a transfer. But the relevance of Section 47 of the Income Tax Act has to be seen only in the background of the provisions relating to the charge on capital gains under Section 45 that given the inclusive definition on transfer under Section 2(47), but for Section 47, these transactions would certainly attract Section 45. Thus, this Section would not apply to a case where no capital gain is involved. When one reads the definition of 'transfer of property' appearing under Section 2(xxiv) of the Gift Tax Act, it would reveal that any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person is also included within the meaning of transfer of property. It is not denied by the assessee that by transfer of shares held by the holding company, there is a diminution in the asset held by the holding company. Even though learned counsel for the assessee immediately replied that ultimately the assessee company is the owner of 100% owned subsidiary company, still, being two different entities, no any justifiable ground to extend the provisions of Income Tax Act to the assessment under the Gift Tax Act for the purpose of understanding the definition of 'transfer of property' as available under the Gift Tax Act - When two companies are treated as two different entities and when the facts are clear, there arises no necessity for lifting the corporate veil to know the nature of transactions or the existence of two entities – Decided against the Assessee.
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