TMI Blog2003 (1) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... ng is of 100 shares each. 50 shares each were held by Samudaya Investment Ltd. (hereinafter referred to as "Samudaya") in the 1st case of Ajax Investment Ltd. and by Adavat Investment Ltd. (hereinafter referred to as "Adavat") in the case of Acropolish Investment Ltd. throughout the previous year. Not less than 50 per cent of equity shares of these two companies are held respectively by Sifa Trading Co. (hereinafter referred to as "SIFA") and Akash Agencies (hereinafter referred to as "Akash") throughout the previous year. Whole of the shares of Samtidaya and Adavat are held by Sifa and Akash. Both Sifa Akash are listed on Bombay Stock Exchange on the last day of the previous year ended on 31-3-1991. 3. The assessees claimed that they satisfied the conditions laid down under section 2(18)(b)(B)(c) of the Act and, therefore, they are widely held companies. 4. The Assessing Officer did not agree with the assessees. He observed that Samudaya and Adavat which are holding 50 per cent equity shares of the assessees are not companies listed in the Stock Exchange. According to him, the assessees' whole of the share capital is not held by the per cent company i.e., Samudaya and Adavat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarded as widely held companies. Sub-clause (b), which is applicable in the generality of cases, provides that a company will be regarded as widely held company if it is not a private company as defined in the Companies Act, 1956, and it fulfils either the conditions specified in item (A) or in item (B) of the said clause. The condition specified in item (A) aforesaid is that shares in the company (not being shares entitled to a fixed rate of dividend) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Security Contracts (Regulation) Act, 1956 and the rules made thereunder. A company which does not fulfil the condition laid down in item (A) has to fulfil the three conditions specified in item (B). 9.2 The Finance Act has substituted item (B) by a new item. The effect of the substituted item (B) will be that where the shares of a company are not listed in a recognized stock exchange in India as on the last day of the relevant previous year the company will not be regarded as a widely field company, unless the shares of the company (not being shares entitled to a fixed rate of dividend), carrying not less ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, Shri J.P. Shah strongly supported the order of the Tribunal in the case of Alligator Investment Ltd. According to him, the assessee companies are Public Ltd. Companies under the Companies Act, 1956. He submitted that SIFA and Akash are listed companies and they held not less than 50 per cent shares of Samudaya and Adavat, the latter became Company to which clause (b) applies. As their shares carrying not less than 50 per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by and were throughout the relevant previous year beneficially held "any company to which this clause applies", namely M/s. Samudaya Investment Ltd. in the first case and M/s. Adavat Investment Ltd. in the second case, the assessee satisfies the condition of Item 'B' of clause (b) of section 2(18) of the Act. He submitted that the enquiry should stop there and the requirement of 100 per cent holding of shares by parent Co. does not apply to the facts of these cases. He also submitted that the Tribunal decision has been accepted all along by the Assessee and even by the Revenue in many cases and the tax effect being meagre the Special Bench should refrain from expressi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t under section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi or Mutual Benefit Society; or (ad) if it is a company, wherein shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies; (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 recognized stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder; (B) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no dispute that these shares held by them are not shares entitled to fixed rate of dividend; that the shares so held carry not less than 50 per cent of voting powers, and were unconditionally allotted to or acquired by Samudaya and Adavat; and that they were held beneficially throughout the previous years relevant to assessment year 1991-92 under consideration. But the question is whether Samudaya and Adavat are any of the entity mentioned in clause (a), (b) or (c) mentioned in Item 'B' above. These are neither government nor corporation established by Central, State or Provincial Act. These are thus companies falling in the category of "Any Company to which this clause applies" not less than 50 per cent of their shares are held by SIFCO and Akash which are public limited companies and their shares are listed on Bombay Stock Exchange on the last day of the previous year as required by Item 'A' because in other words, these are companies as specified in clause (b) of section 2(18) of the Act. 14. As assessee's shares carrying not less than 50 per cent voting powers are unconditionally allotted Lo or unconditionally acquired by Samudaya and Adavat and they held these shares ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies and both the clauses of Item B could operate independently and to the exclusion of each other. 18. In the case of a 100 per cent subsidiary, the only requirement is that the whole of its capital must be held by the parent company either by holding it in its own name or through its nominee, which is a requirement under the corporate law where it is a must that there must be more than one member to constitute a company. On the contrary, in the other case of the subsidiary, by virtue of holding not less than 50 per cent, the requirement and considerations are many to become 'a company to which this clause apply'. It has to undergo the different circumstances which may be stated as under:-- (i) The existence and owning of voting rights by virtue of the holding of shares to the extent of 50 per cent is a must in one case whereas no such apparent consideration is there for holding whole of the capital of the subsidiary which may be with or without voting rights; (ii) The shares not entitled to the fixed rate of dividend, whether with or without right to participate in profits, are not taken into account in one case whereas these are to be taken into consideration for determinin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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