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2019 (5) TMI 906 - HC - Indian LawsLevy of unearned increase in respect of the subject property - Merger of companies - change in the shareholding - DDA claims that the subject property was transferred in the year 2005-06, as there was a material change in the shareholding of the petitioner. According to DDA, the said change in shareholding brought about the change in the effective control in the subject property, which is construed as a transfer, thereby entitling DDA to levy unearned increase. Whether any unearned increase is payable on account of the merger of Aquarium Acquisition Corp. (AAC) with Gillette Company, USA (TGC) or the transfer of TGCs shareholding in the petitioner to Procter & Gamble, Netherlands? HELD THAT:- Unearned increase can be demanded only in cases where subject property is sold, transferred, assigned or its possession is parted with by the lessor. In this case, the lease was in favour of Sharpedge, which merged with the petitioner - The question whether the said merger involved transfer of the subject property is no longer res integra. Indisputably, with the merger of Sharpedge with the petitioner (then known as Indian Shaving Products Ltd.) on 23.04.1992, the subject property also vested with the petitioner along with other assets of Sharpedge. This clearly amounted to transfer of the subject property and, therefore, unearned increase was payable on such transfer, which was occasioned in terms of the scheme of amalgamation as approved by BIFR. The controversy involved in the present petition does not relate to levy of unearned increase on such transfer but on account of dilution of the share capital of TGC by issue of shares to Procter & Gamble, USA and transfer of certain shares held by TGC in the petitioner company to Procter & Gamble, Netherlands. It is trite law that an incorporated company is an entity separate from its shareholders - It is well settled that shares of a company are a separate asset wholly distinct from the assets held by the company. In the present case, there was dilution of the share capital of TGC as well as transfer of shares held by the TGC in the petitioner company. The transfer of shares of the petitioner company cannot be construed as transfer of the assets of the petitioner company. Essentially, DDA seeks to lift the corporate veil of the petitioner in order to establish transfer of assets of the petitioner to the Procter & Gamble Group. Clearly, no grounds for lifting of the corporate veil are established in this case. It is nobody’s case that the transaction relating to dilution of equity of TGC in favour of Procter & Gamble, USA by virtue of the merger of AAC with TGC or the transfer of shares held by TGC in the petitioner company to Procter & Gamble, Netherlands is a subterfuge to transfer the subject property to another entity. The takeover of the Gillette Group by Procter & Gamble, USA was obviously for commercial reasons and the said transaction was not crafted for transferring of the subject property - the fundamental premise that there has been a transfer of the subject property is erroneous and consequently, the demand of unearned increase founded on the same is liable to be set aside. This Court considers it apposite to direct the concerned Wing of DDA to compute the amount refundable to the petitioner having regard to the decision of the DDA, as recorded in its order dated 26.07.2012, and the observations made hereinabove. Petition disposed off.
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