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2023 (11) TMI 754 - ITAT DELHIAddition u/s 56(2)(viib) r.w. Rule 11UA - Issue of preference shares at premium to its holding company - AO held that the assessee company is a company in which public are not substantially interested and hence section 56(2)(viib) of the Act is squarely applicable - whether the assessee company is a company in which public are substantially interested? - HELD THAT:-On examination and consideration of the definition of “company in which public are substantially interested” as per section 2(18) of the Act, the definition of “public company” as given in section 2(71) of the Companies Act, 2013 and the definition of “subsidiary company” as per section 2(87) of the Companies Act, 2013, the Ld. CIT(A) reached the conclusion, with which we agree that the assessee company is a subsidiary company of Allcargo Logistics Ltd. by virtue of clause (a) of the Explanation of section 2(87) of the Companies Act, 2013 and as per proviso of section 2(71) of the Companies Act, 2013 a company which is a subsidiary of a pubic company, is deemed to be a public company. Therefore, the assessee company qualifies as a subsidiary of Allcargo Logistics Ltd. and will be regarded as deemed to be public company. Therefore it will not come within the ambit of section 56(2)(viib) of the Act. Only grievance of the Revenue is that the Ld. CIT(A) has stretched the scope of deeming provision under section 2(71) of the Companies Act, 2013 for further deeming which is beyond its originally intended purpose - In our humble opinion this stand of the Revenue is not legally tenable as the provisions of section 2(87) of the Companies Act, 2013 cannot be overlooked. It is well settled that full effect must be given to the statutory fiction and it should be carried to its logical conclusion.
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