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2024 (2) TMI 59 - HC - GSTSupply of Services - activity of holding of shares of subsidiary company by holding company - Constitutional validity of Notification dated 28.06.2017 bearing No. 11/2017-Central Tax (Rate) (Annexure-A) at Entry No. SAC 997171, and Notification dated 28.06.2017 bearing No 08/2017-Integrated Tax (Rate) (Annexure- B), at Entry No. SAC 997171 - HELD THAT - In the light of the issuance of Circulars by the Central Government and the State Government during the pendency of the present petition, clarifying that holding of shares by M/s. Yonex Co., Japan the holding company in its subsidiary, the petitioner herein at Bengaluru cannot be treated or classified as supply of service . The impugned order dated 02.11.2022 passed by the respondent No. 4 which proceeds on the basis that the said holding of shares amounts to supply of service is clearly illegal, arbitrary and without jurisdiction or authority of law, and the same deserves to b e quashed. The impugned order dated 02.11.2022 issued by the respondent No. 4 is hereby quashed - Petition allowed.
Issues Involved:
The issues involved in the judgment are the validity of notifications related to taxation of holding equity of subsidiary companies under various Goods and Services Acts and the legality of an order issued by a respondent regarding the same. Validity of Notifications: The petitioner sought to strike down notifications issued by Respondent Nos. 1 and 2, which provided for the taxation of holding equity of subsidiary companies. The petitioner argued that such provisions were ultra vires the Central Goods and Services Act, Karnataka Goods and Services Tax Act, and Integrated Goods and Services Tax Act. The petitioner also requested to quash the Explanatory Notes to the Scheme of Classification of Services related to the same issue. Legal Argument: The petitioner's senior counsel highlighted Circulars issued by the Central and State Governments clarifying that holding shares of a subsidiary company by a holding company does not constitute a supply of services under GST. The counsel argued that the impugned order was without jurisdiction in light of these Circulars, and therefore, Prayer Nos. A and B of the petition were not pressed. Validity of Impugned Order: The impugned order dated 02.11.2022, issued by Respondent No. 4, was challenged by the petitioner as being illegal, arbitrary, and without jurisdiction or authority of law. The order proceeded on the basis that holding shares by the holding company amounted to a supply of service, which was contested by the petitioner in light of the Circulars issued by the Central and State Governments. Court's Decision: The Court acknowledged the Circulars clarifying that holding shares by a holding company in a subsidiary does not constitute a supply of service under GST. Consequently, the Court found the impugned order to be illegal and arbitrary, leading to its quashing. The Court allowed the petition and recorded that Prayer Nos. A and B were not pressed by the petitioner. This summary outlines the key issues addressed in the judgment, including the challenge to notifications related to taxation and the legality of the impugned order in light of Circulars clarifying the treatment of holding equity of subsidiary companies under GST laws.
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