9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (11) TMI 754 - AT - Income TaxAddition u/s 56(2)(viib) r.w. Rule 11UA - Issue of preference shares at premium to its holding company - AO held that the assessee company is a company in which public are not substantially interested and hence section 56(2)(viib) of the Act is squarely applicable - whether the assessee company is a company in which public are substantially interested? - HELD THAT -On examination and consideration of the definition of company in which public are substantially interested as per section 2(18) of the Act, the definition of public company as given in section 2(71) of the Companies Act, 2013 and the definition of subsidiary company as per section 2(87) of the Companies Act, 2013, the Ld. CIT(A) reached the conclusion, with which we agree that the assessee company is a subsidiary company of Allcargo Logistics Ltd. by virtue of clause (a) of the Explanation of section 2(87) of the Companies Act, 2013 and as per proviso of section 2(71) of the Companies Act, 2013 a company which is a subsidiary of a pubic company, is deemed to be a public company. Therefore, the assessee company qualifies as a subsidiary of Allcargo Logistics Ltd. and will be regarded as deemed to be public company. Therefore it will not come within the ambit of section 56(2)(viib) of the Act. Only grievance of the Revenue is that the Ld. CIT(A) has stretched the scope of deeming provision under section 2(71) of the Companies Act, 2013 for further deeming which is beyond its originally intended purpose - In our humble opinion this stand of the Revenue is not legally tenable as the provisions of section 2(87) of the Companies Act, 2013 cannot be overlooked. It is well settled that full effect must be given to the statutory fiction and it should be carried to its logical conclusion.
Issues Involved:
1. Whether the assessee company is a company in which the public are substantially interested. 2. Applicability of Section 56(2)(viib) of the Income Tax Act, 1961. Summary: Issue 1: Whether the assessee company is a company in which the public are substantially interested. The Revenue contended that the Ld. CIT(A) erred in deleting the addition by holding the assessee company as a public company and stretching the scope of deeming provision under section 2(71) of the Companies Act, 2013. The assessee, a wholly-owned subsidiary of Contech, received loans and advances converted to Share Application Money (SAM) from Contech, which is a subsidiary of Allcargo Logistics Ltd., a public limited company. The Ld. AO held that the assessee company is a private company and section 56(2)(viib) is applicable. However, the Ld. CIT(A) concluded that the assessee company is deemed to be a public company as per section 2(71) and 2(87) of the Companies Act, 2013, and thus does not come within the ambit of section 56(2)(viib) of the Act. This conclusion was supported by interpretations and precedents, including the judgment of the Bombay High Court in Petrosil Oil Co. Ltd. v. CIT and the ITAT Ahmedabad Bench in Assistant Commissioner of Income-tax v. Ajax Investment Ltd. Issue 2: Applicability of Section 56(2)(viib) of the Income Tax Act, 1961. The Ld. AO added Rs. 4,49,35,344/- to the income of the assessee under section 56(2)(viib) of the Act, arguing that the assessee received the amount in excess of the fair market value of shares. The Ld. CIT(A) deleted this addition, holding that the assessee company is deemed to be a public company and thus section 56(2)(viib) is not applicable. The Tribunal agreed with the Ld. CIT(A)'s interpretation that the assessee company, being a subsidiary of a public company, is deemed to be a public company and thus does not fall under section 56(2)(viib). Conclusion: The Tribunal upheld the Ld. CIT(A)'s order, concluding that the assessee company is deemed to be a public company and section 56(2)(viib) of the Income Tax Act, 1961 is not applicable. The appeal of the Revenue was dismissed.
|
