2017 (4) TMI 1415 - HC - Income Tax

Assessment of holding and subsidiary company - Business Transfer Agreement (BTA) - Assessee transferred its business to Neila Retail Private Limited, should have been added to its income - Held that - The facts are that the holding company of the Assessee was party to the aforementioned BTA and the premium amount of ₹ 6 crores was paid to it. ITAT in the impugned order dated 29th September, 2016 found that the entire sum of ₹ 6 crores was assessed as income in the hands of the holding company. In the circumstances, it was held by the ITAT, and in our view rightly, that the said income of ₹ 6 crores having already been taxed in the hands of the holding company could not be taxed again in the hands of its subsidiary i.e. the Assessee. The addition of the said amount was deleted. In doing so, the ITAT has followed several earlier precedents including the decision of the Supreme Court in Laxmipat Singhania v. CIT 1968 (8) TMI 8 - SUPREME COURT . For the same reason the addition of the amount constituting the store deposit was also deleted. Additions cannot be said to be erroneous in law. No substantial question of law arises.

Summary

Issues:
1. Taxability of premium received pursuant to a Business Transfer Agreement (BTA) in the hands of the Assessee for Assessment Year 2009-10.

Analysis:
The primary issue in this case was the taxability of a premium of &8377; 6 crores received by the Assessee pursuant to a Business Transfer Agreement (BTA). The Revenue contended that this amount should be added to the Assessee's income. However, the Income Tax Appellate Tribunal (ITAT) found that the entire sum of &8377; 6 crores had already been assessed as income in the hands of the holding company of the Assessee, which was a party to the BTA. The ITAT, supported by earlier precedents including the Supreme Court decision in Laxmipat Singhania v. CIT (1969) 72 ITR 291 (SC), concluded that the income taxed in the hands of the holding company could not be taxed again in the hands of its subsidiary, i.e., the Assessee. Therefore, the ITAT rightly deleted the addition of &8377; 6 crores to the Assessee's income.

The ITAT also deleted the addition of the amount constituting the 'store deposit' for similar reasons, indicating consistency in its approach. The High Court concurred with the ITAT's decision, stating that the deletions made by the ITAT were not erroneous in law. Consequently, the High Court found no substantial question of law arising from the ITAT's decision and dismissed the appeal brought by the Revenue.

In conclusion, the judgment clarified the principle that income already taxed in the hands of one entity cannot be taxed again in the hands of another entity through which the income is derived. The decision underscored the importance of avoiding double taxation and upheld the ITAT's deletion of the additions to the Assessee's income, in line with established legal precedents.