TMI Blog2011 (5) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act will not be applicable and the transfer pricing provision in Chapter X are not attracted - When the income is not chargeable to tax as per the finding recorded above, the question of withholding of tax does not arise - All questions are answered in the affirmative, and ruled accordingly - AAR. NOS. 1006, 1031 OF 2010 - - - Dated:- 2-5-2011 - JUSTICE P.K. BALASUBRAMANYAN, KHOSLA, V.K. SHRIDHAR, MEMBERS, JJ. RULING (By V. K. Shridhar) The applicant in AAR No.1006 of 2010 is Goodyear Tire Rubber Company,USA (GTRC), a company incorporated under the laws of Ohio, USA. The applicant in AAR No.1031 of 2010 is Goodyear Orient Company (Private) Limited, Singapore (GOCPL), a company incorporated under the laws of the Republic of Singapore. The Goodyear India Limited (GIL) is a public company incorporated under the Companies Act, 1956, and listed on the Bombay Stock Exchange. GTRC is the promoter of GIL and presently holds 17,069,215 equity shares representing 74% of the total paid up capital of GIL. The remaining 26% shareholding is presently held by public shareholders. GOCPL is a wholly owned subsidiary of GTRC. 2. The applicant, GTRC, submits that as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax in accordance with the provisions of section 195 of the Act on receipt of shares from GTRC? 4. Whether the proposed contribution of shares by GTRC to the Applicant attracts the transfer pricing provisions of section 92 to section 92F of the Act? The applicant in AAR No.1006 of 2010, Goodyear Tire Rubber Company, USA (GTRC) 5. The applicant, GTRC, by referring to the proposed SCD, submits that the clause 2.1 stipulates that all present and future rights, title and interest in the shares of GIL will be contributed to GOCPL. The recitals in clause 2.5 stipulates execution and delivery of such further instrument of conveyance and such other action as may be necessary to convey and transfer to CGOPL good title and possession of the contributed shares. The recital in clause 2.4 stipulates that the contribution is made without consideration and GOCPL is not liable to compensate the applicant for the contribution of shares at any time and in relation to the contribution, no obligation or liability of the applicant is being transferred or would be transferred at any time in future to GOCPL. 5.1 The applicant submits that it has voluntarily proposed to transfer/contribute sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrue or arise on account of transfer as no consideration which could be evaluated in terms of money would be received or was receivable as a result of transfer of shares, found favour with the Authority. It was held that the liability to capital gains would not arise under section 45 read with section 48 of the Act. In the alternative, it was contended that the contribution/transfer of shares carried out in the course of reorganization was in the nature of gift within the contemplation of section 47(iii) of the Act and therefore the charging provision under section 45 stood excluded. Relying on the decision in George Henderson and Co. Ltd. [1967] 66 ITR 622 (SC), it is argued that the expression full value of consideration appearing in section 48 of the Act can not be construed as having reference to the market value of the asset transferred. 7. The relevant provisions of the Act are extracted below: Section 45. Capital gains (1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E,[54EA, 54EB,] 54F, 54G and 54H, be chargeable to income-tax under the head Capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the construction of a particular computation provision. But the question here is whether it is possible to apply the computation provision at all if a certain interpretation is placed on the charging provision. That pertains to the fundamental integrality of the statutory scheme provided for each head. The meaning of the expression full value of the consideration on transfer of the capital asset appearing in section 48 is explained by the Hon ble Supreme Court in the case of George Henderson and Co Ltd. in [1967] 66 ITR 622, as under: The expression full value of consideration cannot be construed as having reference to the market value of the asset transferred but the expression only means the full value of the thing received by the transferor in exchange of the asset transferred and it is not right to say that the asset transferred and parted with is itself the consideration for the transfer. It is evident that legislature itself has made a distinction between the two expressions full value of consideration and fair market value of the capital asset transfer . We are of the opinion that the expression full value of the consideration cannot be construed as the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f shares? The answer to all these questions could only be in the negative. One has to grope in darkness to find valuable consideration for transfer. While transferring Indian company shares to its 100 per cent subsidiary, the applicant, in our view, will derive no profit and make no gain. Nothing in the form of money or money s worth or nothing capable of being turned into money will accrue or arise to the applicant on the date of transfer. Therefore, the contention of the Revenue has to be rejected . 9. Applying the legal position enunciated above and the test laid down by the honourable judges in the cases cited in the rulings of Amiantit International Holding Ltd. and Dana Corporation, we have no hesitation in holding that no consideration would accrue or arise to the applicant by the transfer of shares and the applicant cannot be said to have derived any profit or gain from the transaction. We are of the view that as the consideration is incapable of being valued in definite terms or it remains unascertainable on the date of occurrence of taxable event, the question of applying section 45 read with section 48 of the Act would not arise. As GIL is a company in which public i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) of section 47. Explanation. For the purposes of this clause, fair market value of a property, being shares of a company not being a company in which the public are substantially interested, shall have the meaning assigned to it in the Explanation to clause (vii);] The Learned Senior Advocate submits that GIL is a company in which public are substantially interested. Its shares are listed on BSE, a recognised stock exchange in India. It is, therefore, a company in which public is substantially interested. Further, as GOCPL is the wholly owned subsidiary of GTRC, GOCPL is also not a company in what public are substantially interested. It is stated that provision of section 56(2) (viia) are not attracted. 13 The revenue has not challenged the averments made on behalf of the applicant and its application on the facts of the case. We have perused the provision of section 56(2) (viia). On the basis of the facts placed before us, we do not find any infirmity in the interpretation given on behalf of the applicant. We hold that there is no income liable to tax in India within the meaning of the provision of se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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