TMI Blog2020 (7) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in Section 45 of the Act shall apply to any transfer of capital asset by subsidiary company to the holding company if (a) the whole of the share capital of the subsidiary company is held by the holding company, and (b) the holding company is an Indian company. The fact that the company is an Indian company is not disputed. The dispute raised by the Revenue is that whole of the share capital of the subsidiary company is not held by the holding company as there are six individual shareholders. Total number of shares are 80 lakhs, out of which, 79,99,975 shares are held by the holding company. This fact is also not disputed by the Revenue. The remaining 25 shares are held by six individuals. The explanation offered by the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Income Tax Act, 1951 (for short, the Act) is directed against the order dated 13.4.2016 made in ITA.No.774/Mds/2015 on the file of the Income Tax Appellate Tribunal, Chennai B Bench for the assessment year 2007- 08. 3. The appeal has been admitted on 04.9.2018 on the following substantial questions of law : ( i) Whether on the facts and in circumstances of the case and in law, Tribunal was right in holding that assessee is entitled for exemption under Section 47(v) with respect to the transfer of land to M/s.Simpson Co. Ltd.? (ii) Whether on the facts and in circumstances of the case and in law, Tribunal was right in holding that whole of the share capital of the assessee/subsidiary company is held by the holding c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd., for a consideration of ₹ 375 lakhs resulting in a profit on sale of asset and the same was not offered to tax under the head capital gains against the assessee on the ground that the assessee company is a 100% subsidiary of M/s.Simpson Co. Ltd. by referring to Section 47(v) of the Act. 5. On perusal of the records, the Assessing Officer found that 25 shares of the assessee company out of 80 lakhs shares were held by the nominees of the holding company namely M/s.Simposon Co. Ltd. Therefore, the Assessing Officer held that the assessee was not eligible for exemption of capital gains as per the provisions of Section 47(v) of the Act. 6. Aggrieved by the order of assessment dated 31.12.2013, the assessee filed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amy, learned Senior Standing Counsel is appealing, on a closer scrutiny of the purpose, for which, Section 47 of the Act was introduced, we are convinced to take a decision against the Revenue. We support such a conclusion with the following reasons : Section 47 of the Act deals with transaction not regarded as transfer. Therefore, a purposive interpretation has to be given to the said provision. Otherwise, as rightly contended by the learned counsel appearing for the respondent, the provision itself would become redundant. Section 47(v) of the Act states that nothing contained in Section 45 of the Act shall apply to any transfer of capital asset by subsidiary company to the holding company if (a) the whole of the share capital of the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion reads as follows : 1. Heard learned Counsel for the parties. 2. The Tribunal, in paragraph No.9 of its order, has recorded a categorical finding, which reads as under: ''9. In the case before us, and in view of the provisions of the Companies Act, 1956, it is not possible for the PFIPL to have less than two shareholders. As a matter of fact, there cannot be any company in India which has less than two members i.e. shareholders. Now the requirement of Section 47(v) is that the whole of the share capital of the subsidiary company should be held by the holding company. The whole of the share capital being held by the holding company is certainly not the same thing as whole of the share capital being held in the name of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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