2017 (4) TMI 126 - HC - Income Tax

Non application of sub-section (9) of section 10B - Tribunal came to the conclusion that the share pattern at the end of each financial year, namely, 31st March, 2000 to 31st March, 2003 reveals that the non-resident share holder in the assessee company was the German company - Held that - The tribunal perused the contents of the remand report and arrived at the conclusion that the share has been transferred before March, 2003, interim dividend has been received by the transferree. That was verified from the bank statement of Altana Pharma AG. If the assessing officer verified these documents, accepted them by observing that they are in order, then, the tribunal concluded that there was no reason to hold that any change of ownership occurred. Hence, on facts, it concluded that there is no change in ownership to the detriment of the assessee company. That is how sub-section (9) of section 10B on facts was not attracted. Once we come to this conclusion and a pure finding of fact, which cannot be termed as perverse or vitiated by an error apparent on the face of the record is recorded, then, the appeal does not raise any substantial question of law. Once this was the question and essentially projected, then, we need not admit the appeal. As far as the question at para 6.1 is concerned, that is on the construction of section 10B and we do not think that the said question arises in the backdrop of the tribunal s order impugned in this appeal and in the facts and circumstances peculiar to the assessee s case.

Summary

Issues:
- Challenge to order passed by Income Tax Appellate Tribunal regarding exemption under section 10B of Income Tax Act, 1961.
- Discrepancies in share transfer leading to denial of exemption.
- Interpretation of section 10B regarding change in ownership.

Analysis:
1. The appellant challenged the order passed by the Income Tax Appellate Tribunal regarding the exemption claimed under section 10B of the Income Tax Act, 1961. The respondent assessee had claimed exemption for the assessment year 2006-07, but the assessing officer noted discrepancies in the share transfer, specifically related to the transfer of 1.5% shares to a foreign company. The first appellate authority upheld the assessing officer's decision, stating that the transfer was not in compliance with the provisions of section 10B(9). The tribunal, as the last fact-finding authority, examined the records and concluded that there was no change in ownership detrimental to the assessee company, thereby determining that section 10B(9) was not attracted. This factual finding led to the dismissal of the appeal as no substantial question of law was raised.

2. The assessing officer questioned the share transfer process, highlighting that it seemed like a deliberate attempt to avoid the provisions of section 10B(9) of the Income Tax Act, 1961. However, the tribunal, after thorough examination, found that the transfer of shares was done before March 2003, and the financial interest was retained by the foreign company through its subsidiary. The tribunal verified documents such as bank statements to confirm the transfer and interim dividend received by the transferee. Based on these findings, the tribunal concluded that there was no change in ownership to the detriment of the assessee company, thus negating the applicability of section 10B(9). The appeal was dismissed as the factual findings were deemed sound and not open to challenge.

3. The judgment highlighted that the appeal did not raise any substantial question of law once the tribunal's factual findings were considered. The court emphasized that the interpretation of section 10B and the questions raised were specific to the facts and circumstances of the assessee's case. The court left open the question regarding the construction of section 10B for future consideration in an appropriate case. Ultimately, the appeal was dismissed, and no costs were awarded. The judgment provided a detailed analysis of the share transfer process, the application of section 10B, and the significance of factual findings in determining the eligibility for exemption under the Income Tax Act, 1961.