TMI Blog2013 (9) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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. - TC (Revision).No.1080 of 2004 - - - Dated:- 13-8-2013 - Chitra Venkataraman And K. B. K. Vasuki,JJ. For the Petitioner : Mr. M. P. Senthil Kumar For the Respondent : Mr. N. V. Balaji ORDER (Order of the Court was made by Chitra Venkataraman,J.) The above Tax Case Revision is filed at the instance of the assessee as against the order of the Income Tax Appellate Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) pointed out to the decision reported in 70 ITR 397 S.R.CHOCKALINGA CHETTIAR v. CIT and held that when the consideration received by the assessee was far less than the market value, Section 4 of the Gift Tax Act stood attracted. The issue raised in the appeal was not relating to Income Tax Act, but one under the Gift Tax Act. Consequently, the provisions of Gift Tax Act alone would apply. Thus, the appeal filed by the assessee was rejected. 4. Aggrieved by the same, the assessee went on further appeal before the Income Tax Appellate Tribunal. The Tribunal pointed out that the assessee transferred its rights at Rs.5/- per share as against the market value of Rs.28/- per share as quoted in the Madras Stock Exchange as on 3.9.1993. By transferring the rights to the group company at the price less than the market value, the assessee company claimed short term capital loss and attempted to claim benefit of avoiding gift tax as well. Since the rights were transferred for inadequate consideration, the transactions were squarely covered by Section 4(1)(a) of the Gift Tax Act. The Tribunal pointed out that there was no dispute that the transfer was made to the wholly owned subsid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the interest of the holding company being 100% in the subsidiary company, the Tribunal ought to have followed the decision of the Calcutta High Court reported in (1980) 124 ITR 660 GIFT TAX OFFICER v. VENESTA FOILS LIMITED. Thus, the Tribunal committed a serious error in not lifting the corporate veil to know the actual state of affairs and in not considering Section 47(iv) of the Income Tax Act. When there is no transfer, the question of deemed gift, in any event, did not arise for consideration. 7. Countering the claim of the assessee, learned Standing Counsel appearing for the Revenue pointed out that even assuming that there was no capital loss, the fact remained that the holding company and the subsidiary company, for all practical purpose and legal consequences being two different entities, the transfer of shares by the holding company to the subsidiary company being at the value far below the market price, rightly the Assessing Officer invoked Section 4 of the Gift Tax Act. Pointing out to the definition of 'transfer of property' as appearing in Section 2(xxiv) of the Gift Tax Act and read in the context of Section 45 of the Income Tax Act providing for transactions ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act. It is no doubt true 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. Contrary to the assertion of the assessee herein, 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. Eve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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