TMI Blog2012 (8) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... genuineness and validity of the transaction is necessary. Hence forth, ruling declined Further, Section 47(i) and (iii), applies to gift by individual or a HUF or a Human Agency. A gift by a corporation to another corporation (though a subsidiary or an associate enterprise, which is always claimed to be independent for tax purposes) is a strange transaction. To postulate that a corporation can give away its assets free to another even orally can only be aiding dubious attempts at avoidance of tax payable under the Act. - A.A.R. NO. 973 OF 2010 - - - Dated:- 14-8-2012 - JUSTICE P.K. BALASUBRAMANYAN, J. RULING The applicant is a company incorporated in Singapore. It holds 99.61% of the share capital in Orient Green Power Ltd., a company incorporated under the Companies Act, 1956 which is hereinafter referred to as OGPL India. The applicant also holds 49.75% of the share capital in Bharath Wind Farm Limited, (BWFL India, hereafter) a company incorporated under the Companies Act, 1956. The balance 56.25% shares in BWFL India is held by OGPL India. According to the applicant, it has transferred its 49.75% shares held in BWFL India, to OGPL India without consideration. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, if the transfer of shares is not taxable in India by virtue of Question No.1 and Question No.2, whether OGPP Singapore, the applicant, is required to file any return of income under section 139 of the Act? 3. According to the applicant, the transaction cannot be said to have generated any taxable income to the applicant. Income must be understood as income chargeable to tax under the Act. The transaction was a transfer by way of gift. The investment in BWFL was held by the applicant as a capital asset. Since, no consideration passed for the transfer, the transaction could not be taxed under section 45 of the Act read with section 48 of the Act. Section 45 of the Act has to be read with section 48 of the Act. No gain could be computed in terms of section 48 of the Act. Hence on the principle of the decision in CIT v. B.C. Srinivasa Setty (128 ITR 294) accepted in subsequent decisions, the transaction is not taxable under the Act. Even otherwise, being a gift, it is exempt from the operation of section 45, the charging section under the Act, by virtue of section 47 (iii) of the Act. Since the transaction is not chargeable to tax under the Act, section 92 has no app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicant that the gift was evidenced by a memorandum of gift dated 30.1.2010 entered into between the applicant and OGPL India. The Memorandum of Gift produced recited that on 29.1.2010, a representative of the applicant had physically delivered to a representative of OGPL India, the share of BWFL together with appropriate share transfer forms and the representative of the applicant had declared that he was doing so by way of voluntary gift and placed before the parties, the Board Resolution of the applicant dated 28.1.2010 in that regard. The representative of OGPL India had accepted the gift of the share for no consideration and thanked the applicant for the same and the transfer of the shares from the applicant to OGPL India by way of gift was thereby completed. The Memorandum proceeds to record that the applicant had voluntarily gifted to OGPL India, the BWFL shares, that OGPL India had accepted the gift of shares, that the transfer by way of gift was thereby completed and that the applicant had assured OGPL India that it had the absolute right, full power and absolute authority to gift the shares and that it was duly authorized to make the gift. 7. The applicant has submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttempted to be described as oral gift. The Revenue has attempted to point out the revenue implications of the transaction as put forward to plead that it is a scheme for avoidance of tax. 8. We are dealing with corporate business. The shares dealt with are shares of a public limited company governed by the Companies Act, 1956. It is claimed that, what can be called an oral gift, was made by one corporation to another corporation. Such a form of transfer appears to be strange, unless it be one which has been set up for some purpose. That purpose, according to the Revenue, is for avoiding the payment of tax and to get out of the clutches of Section 56(2)(viia) of the Act which came into effect on 1.6.2001. It cannot be said that this submission on behalf of the Revenue is far-fetched. This submission, in any event made it necessary for the applicant to demonstrate before this authority that the transfer was authorized by the Articles of Association and was effected in the mode prescribed by the Articles of Association and meeting the requirements of section 82 of the Companies Act. 9. This Authority has the jurisdiction not only to consider the law but also to consider the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erials are not before this Authority to enable it to give a ruling satisfactory to its conscience. 11. Before parting with the case, it appears to be proper to observe that in the context of section 47(i) and (iii), this gift referred to therein, is a gift by an individual or a Joint Hindu Family or a Human Agency. Section 47(iii) speaks of 'any transfer of a capital asset under a gift, or will or an irrecoverable trust'. Execution of a will involves a human agency. Cannot the expression gift take its colour from a will with which it is juxtaposed, especially in the background of clause (i) of section 47 and clause (ii) which earlier existed. A gift by a corporation to another corporation (though a subsidiary or an associate enterprise, which is always claimed to be independent for tax purposes) is a strange transaction. To postulate that a corporation can give away its assets free to another even orally can only be aiding dubious attempts at avoidance of tax payable under the Act. This is all the more so since section 47(iv) and section 47(v) specifically provide for covering cases of transfer of capital assets by the parent company to the subsidiary and by the subsidiary to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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