TMI Blog1999 (3) TMI 615X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Tamil Nadu (hereinafter called the SIPCOT ). 3.. The eligibility certificate permitted deferral of sales tax to the extent of 388.20 lakhs of rupees commencing from February 1, 1992 to January 31, 1997. The deferred sales tax was payable from February 1, 1997 to March 31, 2002. An agreement was entered into on August 6, 1992 with the Government of Tamil Nadu represented by the Assistant Commissioner of Commercial Taxes. The petitioners were availing of sales tax deferral under the said agreement. 4.. While so, by G.O. Ms. No. 48 dated February 11, 1994, Government issued further direction that the sales tax deferral granted will be treated as deemed to have been paid and an identical amount will be treated as Government loan. To the said effect a fresh agreement was executed on September 28, 1995. 5.. On February 15, 1996 a new subsidiary company called Sri Jayajothi Textile Mills (P) Ltd., was incorporated. Similarly, on July 1, 1996, another subsidiary company called Sri Jayajothi Textile (P) Ltd., was incorporated. According to the petitioner the said two companies are subsidiary companies of the petitioner-company. It was resolved in the general body meeting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the petitioner-company had resolved to transfer the fixed assets to the subsidiary company, in law no document had been executed to complete the possession. (2) The transfer of the fixed assets from the holding company in favour of a wholly owned subsidiary company is not prohibited under the agreements. (3) The transfer in any event does not affect the interest of the Commercial Taxes Department. 7.. When the above O.Ps. were taken up for hearing on December 23, 1998 the following temporary direction was issued hoping that some solution could be arrived at: There is a subsequent development in the case, in the sense that a petition has been filed by the parent company on November 4, 1998, seeking amendment of the agreement to enable the subsidiary company to maintain the schedule of repayment as per the earlier agreement with the parent company. If the above proposal is not prejudicial to the interest of the Revenue, there can be no objection for the Commercial Tax Officer to look into the matter and pass appropriate orders. The pendency of this O.P. need not be a bar to the authorities passing orders. In this view of the matter, we direct the Commercial Tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court the facts are that the subsidiary company was created solely for the purpose of supplying electricity to the holding company, to avail of the exemption from payment of electricity duty. The company had to prove that he was using the electricity from his own source of generation. Therefore, the question was whether the supply by the subsidiary company could be treated as the own source of generation of the holding company. In the said judgment it has been held that the corporate veil must be lifted and it must be held that the power supply from the subsidiary company was the power supply of the holding company itself and therefore the exemption from payment of electricity duty could be availed of. We have carefully perused the said judgment and we find that it cannot be applied to the facts of the present case. As many as 11 reasons are given by the Supreme Court to hold that the only object of creating the subsidiary company was to supply power to the holding company. The subsidiary company was not a public utility, but a captive plant of the holding company. In the very same judgment it has been pointed out that the court had disregarded the separate legal ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the unit was entitled for the benefit of exemption. [1990] 76 STC 462 (Guj) (Yeast Alco Enzymes Limited v. State of Gujarat) was relied upon for the preposition that the emphasis was on the pioneer unit and not the pioneer entrepreneur. We are not concerned with such a construction in the case before us. 11.. But the decision which according to the petitioner is clinching is the decision of the Special Tribunal in O.P. No. 32 of 1999 dated February 5, 1999. In that case a partnership concern was given the benefit of the deferral scheme under the very same Government order. The partnership-firm converted itself into a private limited company and on the ground that there was violation of the agreement, the entire arrears were demanded. The argument was that there was no condition prohibiting the change of constitution, but the prohibition was against alienation of the fixed assets of the unit. In that case a Division Bench of this Special Tribunal agreed with the assessee that there was no specific condition prohibiting the evasion of the company into a private limited company. The properties of the concern was still with the assessee. The SIPCOT had approved the change of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its agent for the purpose of management. The holder of a deposit account in a company is its creditor; he is not the owner of any specific fund lying with the company. A shareholder, a depositor or a director may not therefore be entitled to move a petition for infringement of the rights of the company, unless by the action impugned by him, his rights are also infringed. 13.. In the order dated January 25, 1999, rejecting the request of the petitioner to amend the eligibility certificate and enter into a fresh agreement with the subsidiary company it is pointed out that the original agreement holder was a limited company, whereas the subsidiary company is a private limited company. It is rightly pointed out that both the companies cannot be held to be one and the same company. Further, the parent company had become a separate unit and a separate registration certificate under the Tamil Nadu General Sales Tax Act was obtained with effect from October 31, 1996 in the name and style of Sri Jayajothi Textile Mills Private Ltd., the transferee-company. No doubt, it is not pointed out as to how the interest of the revenue will suffer especially when the subsidiary company had been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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