TMI Blog2019 (12) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... AR of the assessee - Section 46A of the Act has been introduced in the statute book from 01.04.2000 and the issue involved is different and therefore, this judgment is not applicable in the present case where section 46A is applicable as per the department and in our considered opinion also. When shares can be held by nominees also, it is not impossible to hold entire shares of the subsidiary company by the holding company along with one or more nominees or by the nominees only without holding of any share by the parent company. Second reasoning given by us about non applicability of section 47 (iv) is this that in section 46A, there is no requirement of transfer of any capital asset being shares. Only requirement is that a shareholder receives a consideration from a company for purchase of its own shares and in that situation, subject to section 48, the difference between the cost of acquisition and value of consideration received by the shareholder shall be deemed to be the capital gains arising to such shareholder in the year in which, the shares are purchased by the company. There is no mention of the term Transfer in section 46A. Section 47 (iv) is regarding non applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and therefore erred in law to conclude that gains arising on buy-back of shares is taxable under section 46A of the Act and not under section 45 of the Act which is the charging section to bring capital gains to tax under the Act. 4. The learned CIT(A) has erred in law by concluding that section 47 of the Act is limited in its application only to section 45 of the Act and does not apply to buy-back of shares to which provisions of section 46A of the Act also applies. 5. The learned CIT(A) has erred in law by providing that buy-back of shares is not one of the modes of transfer covered under section 47(iv) of the Act since it results in extinguishment of the capital so transferred which offends the provisions of section 47A of the Act which in turn presumes existence of the capital asset. 6. The learned CIT(A) ought to have appreciated that section 47A of the Act does not have a specific requirement for the capital asset to be in existence post the transfer of such asset. Further, there is no provision under the Act which states that the capital asset is to be in existence for bringing the gains arising therefrom to tax under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt and pointed out that para 11 of this judgment is relevant. As against this, learned DR for the Revenue supported the order of CIT(A). He submitted that section 46A is a charging section and, in this regard, he placed reliance on the Tribunal order rendered in the case of Goldman Sachs (India) Securities (P.) Ltd., Vs. ITO (International Taxation) as reported in 70 taxmann.com 46 (Mumbai Trib.). He submitted a copy of this Tribunal order. He also submitted that otherwise also, section 47(iv) is not applicable because as per this section, the parent company or its nominees should hold the whole of the share capital of the subsidiary company whereas in the present case, the parent company is holding only 99.99% of shares of the subsidiary company and in this regard, our attention was drawn to para No.8.1 of the order passed by the AO under section 201(1) of the IT Act and it was pointed out that the assessee has contended that in the present case, although it was pointed out by the assessee that the transaction is covered by section 47(iv) of the Act but as per the AO, the admitted facts are contradictory to the statement because it is undisputed that the parent company M/s. Acci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parent company M/s. Acciona Energia International S.A, Spain. The judgment cited by learned AR of the assessee having been rendered in the case of CIT Vs. Papilion Investments (P.) Ltd., (supra) is not applicable. Moreover, in that case, 2 shares out of shares issued and subscribed were held by assessee company with a person, who was Director of the assessee company and this was the only objection in that case that entire shares were not held by the parent company in its own name and hence, it appears that in that case, the requirement of section 47(iv) was being satisfied because the remaining shares were held jointly by the assessee company along with its Director. 6. We have seen that section 47(iv) of the Act is not applicable in the present case for this reason that the parent company is not holding whole of the share capital of the subsidiary company along with its nominees. But still, we feel it proper to decide the second aspect of the matter as to whether section 46A of the Act is applicable in the present case or not. We find that first important section regarding chargeability of capital gains is section 45 which is the section regarding profit or gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able in respect of receipt of consideration from any company for purchase of its own shares. Since there is no requirement in section 46A of the Act that there has to be a transfer of shares, section 47(iv) of the Act is not applicable in connection with the issue covered by section 46A of the Act and hence, there is no merit in the argument that because of section 47(iv) of the Act, the capital gain in the present case is not chargeable to tax. Now we deal with the applicability of the judgment of the Hon ble Bombay High Court rendered in the case of Cadell Wvg. Mill Co. (P.) Ltd., Vs. CIT (supra) on which reliance has been placed by the learned AR of the assessee. In our considered opinion, this judgment is not applicable in the present case because in that case, the issue in dispute was as to whether the amount of ₹ 1.40 Crores received by draft dated 05.12.1989 in consideration of surrendering the statutory tenancy arise / or the possession rights in a property can be construed to be a casual and non-recurring receipts within the meaning section 10(3) of the Act and as such exigible to tax under section 56 of the Act. This judgment is dated 06.02.2001 and the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were purchased by the company. 9. As per the tribunal order cited by the learned DR of the revenue, section 46A of I T Act was considered and it was held that for the consideration received by a shareholder on buy back of shares by the company concerned, capital gain tax is payable and such receipt of shareholder is not a deemed dividend. This judgment is an authority regarding applicability of section 46A in respect of receipt by shareholder on account of buy back of shares from the concerned company but there was no argument or decision about applicability of section 47 (iv) of I T Act. We have already noted and decided that section 47 (iv) is not applicable in the present case for two reasons. First reason given by us is this that in the present case, the assessee is not holding whole of the shares of the subsidiary company by itself or along with its nominee or nominees as required by section 47 (iv) of I. T. Act. Regarding the judgment of Hon ble Bombay High Court rendered in the case of CIT vs. Papilion Investments Pvt. Ltd., 206 Taxman 142, we have noted that in that case, this was the argument of the revenue before Hon ble Bombay High Court and before the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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