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2024 (12) TMI 1262 - AT - Income TaxDenial of exemptions on transfer of leasehold rights in respect of land and building - based on the valuation undertaken by the DVO, the AO opined that the Assessee has undervalued the assets and made addition under the head of Business Income and held that the said transfer of the lease hold right was not exempt u/s 47(iv) on the ground that the Assessee has not been able to explain that the share holding pattern is not exactly same in the case of the subsidiary company. - AO has also invoked the provision of Section 56(2)(x) of the Act in the hands of the recipient HELD THAT - As per Section 47(iv) of the Act if the transfer of a capital asset by a company made to its subsidiary company cannot be regarded as transfer and nothing contained on Section 45 of the Act shall apply if the parent company or its nominee holds entire share capital in the transferee subsidiary company; and the subsidiary company is an Indian Company. Considering the fact that InterGlobal Education Services Ltd. is a subsidiary of the Assessee and the Assessee including its nominees holds the entire share capital in InterGlobal Education Services Ltd. and the said InterGlobal Education Services Ltd. being an Indian Company meets all requirements of Section 47(iv) of the Act. Thus, the transfer of lease hold right in respect of the subject property for Assessment Year 2017-18 is not liable to tax. In the absence of any contrary material brought to our notice by the Department to dispute or disprove the factual aspects mentioned in the order of the Ld. CIT(A), we find no error or infirmity in the order of the Ld. CIT(A). Accordingly, we find no merit in the Grounds of Appeal of the Department of Revenue.
Issues:
Appeal against order of Ld. CIT(A) deleting addition made by A.O. on transfer of leasehold rights in respect of land and building under Section 47(iv) of the Income Tax Act, 1961. Detailed Analysis: 1. Background and Assessment Order: The appeal was filed by the Revenue against the order of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre for the Assessment Year 2017-18. The Assessee's income was initially computed at Rs. 146,03,74,830/-, with an addition of Rs. 37,65,51,700/- made under Section 47(iv) of the Act. The Ld. CIT(A) partly allowed the appeal, leading to the Revenue's current appeal. 2. Arguments of the Department and Assessee: The Departmental Representative contended that the addition under Section 47(iv) should not have been deleted by the Ld. CIT(A), relying on the A.O.'s findings. On the other hand, the Assessee's Representative argued that the conditions of Section 47(iv) were met, as the subsidiary company was wholly owned by the Assessee, an Indian Company. 3. Transfer of Leasehold Rights and Valuation: The Assessee acquired leasehold rights for constructing an aviation training center, later transferring these rights to its wholly owned subsidiary for Rs. 46,07,78,600/-. The valuation was based on a registered valuer's report, and the consideration was paid through the issuance of shares by the subsidiary. 4. Analysis of CIT(A) and Tribunal: The Ld. CIT(A) found that the conditions of Section 47(iv) were satisfied, as the subsidiary was wholly owned by the Assessee and was an Indian Company. The Tribunal concurred, noting the conveyance deed and valuation by a government registered valuer. As per Section 47(iv), the transfer of leasehold rights was not taxable. 5. Legal Provisions and Conclusion: Section 47(iv) exempts the transfer of a capital asset by a company to its subsidiary if certain conditions are met, including complete shareholding by the parent company in the subsidiary, and the subsidiary being an Indian Company. Since these conditions were fulfilled, the Tribunal upheld the CIT(A)'s decision to delete the addition under Section 47(iv). The appeal by the Department was dismissed, affirming the non-taxability of the transfer of leasehold rights. In conclusion, the Tribunal's decision was based on the clear fulfillment of the statutory requirements under Section 47(iv) of the Income Tax Act, leading to the dismissal of the Revenue's appeal against the deletion of the addition made by the Assessing Officer.
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