TMI Blog2019 (2) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... o does not agree to the submission of learned counsel for the petitioner that alternatively, the case of the petitioner-Company will fall under clause (vi)(A) of Explanation of clause (1)(a) of Section 245C as the petitioner- Company is covered by the expression of any person who carries on a business or profession in which the specified person i.e. Shri Ram Jashandas Bhatia holds substantial interest, this court finds that the submission is wholly without any substance and even the provisions of Section 13 of the General Clauses Act to read singular as plural for the term person used under clause (B) of Explanation, cannot be construed in the manner, as has been canvassed. This court finds that the Delhi High Court in the case of Rockland Hotels Ltd. Vs. Income Tax Settlement Commission, Principal Bench and Ors. [2015 (10) TMI 1904 - DELHI HIGH COURT] and other connected writ petitions has interpreted the entire Section 245C of the Act, 1961 dealing with the applications for settlement of the cases. Order of settlement commission sustained - Decided against the assessee. - S.B. Civil Writs No. 2050/2018 - - - Dated:- 18-12-2018 - Mr. Justice Ashok Kumar Gaur For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Deepak Rajwanshi Rs.6,85,61,116/- Rs.2,28,87,964/- Arun Mehta Rs.7,19,78,909/- Rs.2,43,07,779/- 5. The petitioner-Company has pleaded that as per clause (i) to the proviso to Section 245C(1) of the Act, 1961, it is sine qua non for a valid application before the Settlement Commission that the income tax payable on the additional income disclosed in the application exceeds the amount of ₹ 50 Lakhs and the said applicant is termed as specified person for the other applicants who are related to the specified person for whom the condition of tax payable on additional income disclosed in the application is minimum of ₹ 10 Lakhs. 6. The petitioner-Company has pleaded in the petition that it qualifies the definition of relation with the specified person within the meaning of explanation (a) to Section 245C(1) of the Act, 1961 as covered under clause (v) of explanation (a) to Section 245C of the Act, 1961 and was thus, competent to maintain settlement application declaring tax payable at ₹ 10,02,952/-. 7. The petitioner-Company has given shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner-Company is having 100% interest in the business or profession of the specified person (fulfilling the condition of substantial interest , as defined in clause (B) of the explanation (b) to Section 245C(1) of the Act, 1961). (ii) The Settlement Commission failed to appreciate that the collective stake of all the three specified persons exceeded 20% in the petitioner-Company and, therefore, the petitioner-Company alternatively gets covered under clause (vi)B of explanation (a) to Section 245C(1) of the Act, 1961. (iii) The interpretation adopted by the Settlement Commission would be contrary to the spirit and legislative intention behind the set-up of the Settlement Commission and the relevant provision needs to be suitably read down to hold that the petitioner- Company being covered under the expression in relation to the specified person as per explanation (a) to Section 245C(1) of the Act, 1961. 12. The respondents have filed reply to the writ petition and they have supported the impugned order dated 03.01.2018 passed by the Settlement Commission. 13. The respondents have pleaded in the reply that the petitioner-Company has misinterpreted the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opriate to quote Section 245C of the Act, 1961 to examine the present controversy, which reads as follows:- Application for settlement of cases. 245C. (1) An assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Assessing Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner hereinafter provided : Provided that no such application shall be made unless,- (i) in a case where proceedings for assessment or reassessment for any of the assessment years referred to in clause (b) of sub-section (1) of section 153A or clause (b) of sub-section (1) of section 153B in case of a person referred to in section 153A or section 153C have been initiated, the additional amount of incometax payable on the income disclosed in the application exceeds fifty lakh rupees, (ia) in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember; (vi) any person who carries on a business or profession,- (A) where the specified person being an individual, or any relative of such specified person, has a substantial interest in the business or profession of that person; or (B) where the specified person being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person; (b) a person shall be deemed to have a substantial interest in a business or profession, if- (A) in a case where the business or profession is carried on by a company, such person is, on the date of search, the beneficial owner of shares (not being shares entitled to a fixed rate of dividend, whether with or without a right to participate in profits) carrying not less than twenty per cent of the voting power; and (B) in any other case, such person is, on the date of search, beneficially entitled to not less than twenty per cent of the profits of such business or profession. (1A) For the purposes of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 applications which were filed under Section 245D(2C) of the Act, 1961 on 31.10.2017. The application No.RJ/JP-51/17-18/39-IT was filed by the petitioner- Company. The impugned order further reflects that the applications No.1 to 4 and 6 were filed by the individuals, application No.5 was filed by the firm and applications No.7 to 11 were filed by the Companies. The present petitioner-Company, assailing the impugned order dated 03.01.2018, was at S.No.11 in the Settlement Application. 22. A perusal of the impugned order passed by the Settlement Commission shows that the Settlement Commission has taken a view that explanation (iv) and (v) are not applicable to the case of the petitioner-Company and the case was to be governed by explanation (vi). The Settlement Commission has taken a view that word substantial interest in the business requires that Directors should have such substantial interest, as defined in the Act, 1961 under clause (b). 23. The Settlement Commission has further taken a view that substantial interest was lacking in the instant case and the petitioner-Company cannot take recourse to the provisions of clause (v) of the explanation. The Settlement Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(a) of Section 245C of the Act, 1961, as the petitioner- Company is covered by the expression of any person who carries on a business or profession in which the specified person i.e. Shri Ram Jashandas Bhatia holds substantial interest, this court finds that the submission is wholly without any substance and even the provisions of Section 13 of the General Clauses Act to read singular as plural for the term person used under clause (B) of Explanation, cannot be construed in the manner, as has been canvassed. 31. This court finds that the Delhi High Court in the case of Rockland Hotels Ltd. Vs. Income Tax Settlement Commission, Principal Bench and Ors. [Writ Petition (Civil) No.3557/2014] and other connected writ petitions by its judgment dated 20.10.2015 has interpreted the entire Section 245C of the Act, 1961 dealing with the applications for settlement of the cases. The Delhi High Court has interpreted the clauses of Section 235C of the Act, 1961 and the portions of the judgment, relevant for the present purpose, are quoted hereunder:- 5. From a reading of clause (a) (v) of the Explanation to subsection (1) to section 245C, it emerges that the following twelve catego ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the definition of related parties for the purposes of clause (ia) of the Proviso to subsection 1 to section 245C of the Act. 7. So, under clause (a)(v), only if a director of the applicant company has a substantial interest in the specified person (company), then, the applicant company, its directors and relatives of its directors qualify as related parties. A company would not qualify as a related party merely because any relative of one of its directors has a substantial interest in the specified person. However, under clause (a)(vi), the applicant would qualify as a related party, if a specified person (company) or any of its directors or any relative of any of its directors have a substantial interest in the applicant. 8. The following flow chart would explain the provision graphically: 18. Applying the parameters of clauses (a)(v) and (a)(vi), only if a director of the petitioner companies has a substantial interest in the specified person (company), then, the petitioner companies, their directors and relatives of their directors qualify as related parties. The Petitioner companies would not qualify as a related party merely because any relative of one of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner as a related party. We do not find any infirmity with the reasoning of the Settlement Commission. Since the conditions of Explanation (a)(vi)(B) are not satisfied, these writ petitions are thus liable to be dismissed. XXX XXX XXX 23. The finding of the Settlement Commission is that there is no shareholder having substantial interest in this company i.e. there is no shareholder having more than 20% shares in the Petitioner companies. As there is no person holding substantial interest in these 3 companies, conditions mentioned in Explanation (a)(vi)(B) are not satisfied. The words used are any director of such company and any relative of such director . If the intention of the legislature of had been to cumulatively consider the shareholding of more than one directors or more than one relative of such directors to constitute substantial interest, then it would have specified so. Since the legislature has not provided for clubbing of the shareholding of different persons to determine substantial interest, the same cannot be considered. The fact that the legislature has catered for a situation of beneficial ownership of shares shows that the omission of clubbing of share ..... 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