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TMI Blog2023 (11) TMI 754X X X X Extracts X X X X X X X X Extracts X X X X ..... y/all of the grounds of appeal before or during the course of the hearing of the appeal." 3. Briefly stated, the facts are that the assessee is a wholly-owned subsidiary of M/s. Contech Transport Services Pvt. Ltd. ("Contech"). Contech is holding 48.2% shares of the assessee company but having 100% voting rights. Contech in turn is a wholly owned subsidiary of M/s. Allcargo Logistics Ltd. which is a widely held public limited company and is listed at the recognised stock exchanges in India. 3.1 The assessee company and Contech both are private limited companies under Companies Act, 1956 and under the Companies Act, 2013. 3.2 The assessee company had received loans and advances amounting to Rs. 4,11,67,925/- on various dates in Financial Year ("FY") 2011-12 and earlier years from Contech. The said amount was converted to Share Application Money ("SAM") by entry in the books of account of both the assessee company and Contech on 01.04.2012. The assessee company received further SAM of Rs. 45,00,000/- on various dates in FY 2012-13 from Contech. The total SAM received by the assessee company from Contech amounted in all to Rs. 4,56,67,925/-. The shares were issued to Contech for Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 4 of the appellate order. The Ld. CIT(A) held that the assessee company is deemed to be public company and it would not come within the ambit of section 56(2)(viib) of the Act and deleted the impugned addition by observing and recording his findings as under:- "6. In the light of the aforesaid facts, the question for determination in the present appeal is: whether the appellant company is a company in which public are substantially interested? The phrase "company in which public are substantially interested" is defined in sec. 2(18) of the I.T. Act, 1961 a relevant portion of which is as under: "Company in which public are substantially interested" Company is said to be a Company in which public are substantially interested - ..... (b) if it is a company which is not a private company as defined in the Companies Act, 1956 (1 of 1956), and the conditions specified either in item (A) or in item (B) are fulfilled, namely:- (A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blic company as given in sec. 2(71) of the Companies Act, 2013 which reads as under: "(71) "public company" means a company which - (a) is not a private company and; (b) has a minimum paid-up share capital as may be prescribed: "Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles." Proviso to sec.2(71) provides an exception in the definition of "public company". It provides that a company which is a subsidiary of a company which is not a private company, shall be deemed to be "public company" even though such subsidiary company is a private company in its articles. In the present case, Contech Transport Services Pvt. Ltd. is a wholly owned subsidiary of Allcargo Logistics Limited, which is a widely held company listed at the Stock Exchanges. Therefore, Contech Transport Services Pvt. Ltd., being a subsidiary of a widely held company, is deemed to be public company for the purposes of Companies Act, 2013. Now the assessee company, Comptech Solutions Pvt. Ltd., is a subsidiary of Contech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies Act, 2013. The AO has not given any reason to hold that a subsidiary of a subsidiary would not be regarded as a deemed public company. 6.4 In this respect a reference can be made to the judgment of the Bombay High Court in the case of Petrosil Oil Co. Ltd. v. CIT (236 ITR 220) wherein the assessee-company incorporated under the Companies Act, 1956 in India was a wholly owned subsidiary of a company Incorporated in United Kingdom (UK company) which itself was also a subsidiary of another company based and registered in United States of America holding its 100 percent share (US Company). The Bombay High Court held thatthe Income-tax Act nowhere defines what is a 'subsidiary company. The Finance (No. 2) Act also does not define what is a 'subsidiary company'. There would be a dichotomy if the assessee-company were to be a subsidiary company of the U.S. company for the purposes of the Companies Act, but were deemed not to be a subsidiary of the U.S. company for the purposes of the Act. The meaning given to the term 'subsidiary company' under section 4(1)(c) of the Companies Act must be imported into section 108. Of course, the further condition laid down un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(71) of the Companies Act 2013, a company which is a subsidiary of a Public company, is deemed to be a public company. So, it is concluded that the Appellant company is a subsidiary of Allcargo Logistics Ltd. a public limited company and will be regarded as deemed to be public company in which public are substantially interested. Therefore, under the facts and circumstances of the case, it is held that Comptech Solutions Private Ltd. is deemed to be public company and it would not come within the ambit of Section 56(2)(viib) of the Income Tax Act 1961 and therefore, the addition made by the A.O. is not sustainable hence deleted." 8. Dissatisfied, the Revenue is in appeal before the Tribunal and ground No. 1 and 2 (a) relate thereto. 9. The matter came up for hearing on 6.4.2023, 21.6.2023 and finally on 30.8.2023. None attended the hearing on any of the above dates for and/or on behalf of the assessee, though the Revenue was represented by the Ld. Sr. DR. We, therefore proceeded to decide the Revenue's appeal after hearing the Ld. Sr. DR. 10. The Ld. Sr. DR vehemently supported the order of the Ld. AO and took the stand as taken by the Revenue in its ground. 11. We have c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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