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TMI Blog2018 (6) TMI 288X X X X Extracts X X X X X X X X Extracts X X X X ..... o the two Business Transfer Agreement (BTA), on 30/12/2010, with RCC Sales Pvt. Ltd. (RCC)and Vidyut Metallics Pvt. Ltd. (VMPL)for acquisition of business operations of said companies on a slump sale basis for a consideration of Rs. 27. 30 crores and Rs. 110. 50 crores respectively, that on 30/03/2011, it issued 37, 600 fresh equity shares @ 39, 500/- per share of Rs. 10/-each to Super Max Singapore Pte Limited(SSPL), the 99. 99% shareholder of the assessee. Thus, there was infusion of share capital of Rs. 148, 52, 00, 000/-during the year under consideration. He further observed that M/s. Actis Consumer Grooming Products Ltd. , Mauritius(Actis) subscribed to 29. 17% shares of Super Max Offshore Holdings (SMOH), Cayman Islands for Rs. 1002. 50 crores, that remaining 70. 83% stake was transferred to M/s. Super Max Mauritius, that sale of stock to M/s. Actis was to be taken as basis of valuing the stake of remaining 70. 83% shares. In light of the above discussion, he held that the assessee had transferred the stake outside India to M/s. Super Max, Singapore at 148. 52 crores, that the actual value of transfer of shares was Rs. 3437. 02 crores, that an amount of Rs. 3288. 50 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on the basis of transfer of stake(interest). He observed that the assessee had co-operated with the AO and had not provided necessary information about its non-resident AE. s, that the AO had to take help of FTD of the CBDT. He referred to the case of Sumati Dayal(214ITR801)and held that preponderance of probability was looked into. He also referred to the case of Killick Nixon Ltd. (208taxmann45). 4. Before us, the Authorised Representative(AR)argued that there had been no change in shareholding of assessee till date, that prior to the infusion of capital by the parent company, SSPL, was the 99. 99% shareholder, that post the infusion SSPL continued to be 99. 99% share -holder of assessee, that during the transfer pricing(TP)proceedings, the Transfer Pricing Officer(TPO), after enquiring into the arm's length pricing of the 37, 600 shares issued, agreed with the submissions made by the assessee and made no adjustments with respect thereto , that it was not explained as to how the AO made the assertion that STCG had occurred to the assessee, that it had not transferred any capital asset, that it had only acquired the business of VMPL and RCC vide BTA. s dated 30/12/2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a transfer could not result in alleged gains in the hands of the assessee for being taxed in India, that the assessee was not even a party to the transaction, that several commercial considerations were the cause of creating various entities outside India, that global structure was not created merely to hold business interest in the assessee company. The Departmental Representative(DR)relied upon the order of the FAA. While filing written submission, he has made elaborate arguments about validity of the assessment proceedings. But, on merits he has referred to the orders of the AO and the FAA. 5. We have heard the rival submissions and perused the material before us. 5.1. Undisputed facts of the case are that: i. the assessee is a corporate entity, ii. during the year under appeal the assessee purchased businesses of RCC and VMPL on slump sale basis for Rs. 27. 30 crores and Rs. 110. 50crores. iii. SSPL, was issued shares by the assessee @39, 500/- per share of Rs. 10/-each and it received Rs. 148. 52 crores from the Singapore entity during the year under appeal. iv. valuation of the RCC and VMPL and the valuation of the share issued by the assessee to SSPL has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not intend to tax the full value of the capital asset as represented by the sale proceeds, but permitted the assessee to deduct from the sale proceeds the actual cost to him of that capital asset. Therefore, there was no tax on capital value in respect of all assets of an assessee; nor was the tax on the full value of the capital asset. The tax was conditioned by the capital asset being sold, exchanged or transferred; and it was further conditioned by certain deductions which were permissible to the assessee, the most important of them being the cost of the capital asset to him. In the year 1956, some changes were made to capital gains tax. In the present Act, capital gains tax find place in sections 45 to 55 and word transfer is part of section 2 (47). In short, section 12B was been bifurcated and has been suitably amended. 5.2. We can safely say that the incidence of levy u/s. 45 of the Act is on the capital gains to be computed in the manner provided for in section 48 r. w. s. 55(2) of the Act. The deduction permissible u/s. 48 is the cost of acquisition of the capital asset transferred for consideration, whether or not it was a capital asset on the date of its acquisition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 45 of the Act, in the case under consideration. The AO and FAA have tried to build a house without laying down foundation. Without the existence of capital assets they have tried to tax capital gain. They have nowhere mentioned as to which capital asset was transferred by the assessee, during the year under consideration. Secondly, it is also not known as to whom the assets were transferred. As per the balance sheet of the assessee it had sold some vehicles during the year and no other asset was sold. If no asset other than vehicles was sold, then how the capital gain would arise about shares, is beyond our comprehension. In spite of reading the orders of the AO and FAA many a times carefully, we are not clear as to how the acquisition of shares of SOHM by Actis can be used for determining the alleged taxability of the assessee under the head short term capital gains. Both the entitiesi. e. Actis and SOHM are not located in India. They are fifth generation holding companies and any transaction between them cannot be imported to tax alleged capital gains of the assessee. As stated earlier, the assessee had acquired businesses two Indian entities, namely, RCC and VMPL. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d" means a bond- (a) issued by any infrastructure capital company or infrastructure capital fund or public sector company or scheduled bank on or after the 1st day of June, 2005 ; (b) in respect of which no payment and benefit is received or receivable before maturity or redemption from infrastructure capital company or infrastructure capital fund or public sector company or scheduled bank ; and (c) which the Central Government may, by notification in the Official Gazette, specify in this behalf. Explanation For the purposes of this clause, the expression "scheduled bank" shall have the meaning assigned to it in clause (ii) of the Explanation to sub-clause (c) of clause (viia) of sub-section (1) of section 36. " Explanation 2 to section 2(47)was introduced in the year 2013, whereby the concept of 'creating of interest in any assets in any manner', relied upon by the FAA, was introduced. Explanation 2 reads as under: "For the removal of doubts, it is hereby clarified that "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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