9911796707
TMI Blog2012 (6) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... help or protect the respondent assessee as the said order had proceeded on the basis of premise and assumption that the respondent assessee was not a 100% subsidiary of Sunair Hotels Ltd. This aspect will be examined by the tribunal. X X X X Extracts X X X X X X X X Extracts X X X X ..... o be a subsidiary of another if, but only if,-- (a) that other controls the composition of its Board of directors; or (b) that other-- (i) where the first-mentioned company is an existing company in respect of which the holders of preference shares issued before the commencement of this Act have the same voting rights in all respects as the holders of equity shares, exercises or controls more than half of the total voting power of such company; (ii) where the first-mentioned company, is any other company, holds more than half in nominal value of its equity share capital; or] (c) the first mentioned company is a subsidiary of any company which is that other's subsidiary. Illustration Company B is a subsidiary of Company A, and Company C is a subsidiary of Company B. Company C is a subsidiary of Company A, by virtue of clause (c) above. If Company D is a subsidiary of Company C, Company D will be a subsidiary of Company B and consequently also of Company A, by virtue of clause (c) above; and so on. (2) For the purposes of sub-section (1), the composition of a company's Board of directors shall be deemed to be controlled by another company if, but only if, that other company by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion "equity share capital" has the same meaning as in sub-section (2) of Section 85. (6) In the case of a body corporate which is incorporated in a country outside India, a subsidiary or holding company of the body corporate under the law of such country shall be deemed to be a subsidiary or holding company of the body corporate within the meaning and for the purposes of this Act also, whether the requirements of this section are fulfilled or not. (7) A private company, being a subsidiary of a body corporate incorporated outside India, which, if incorporated in India, would be a public company within the meaning of this Act, shall be deemed for the purposes of this Act to be a subsidiary of a public company if the entire share capital in that private company is not held by that body corporate whether alone or together with one or more other bodies corporate incorporated outside India." 6. The Assessing Officer in the block assessment order dated 29th November, 2002, held that the assessee was not a wholly owned subsidiary of Sunair Hotels Ltd. He observed that during the course of search operations, material/documents seized contradicted the claim of the respondent assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bricated as per the Assessing Officer. The said forms were purchased from Jain Book Agency (Sales), Connaught Place, New Delhi and as per the statement of Nabhi Kumar Jain and Meenakshi Mathur of Jain Book Agency, dated 28th February, 2001 these forms were printed and sold after May-June, 1998. The statement made by Nabhi Kumar Jain and Meenakshi Mathur have been quoted in the assessment order. (v) Two shareholders, i.e Robin Gupta and Radhika Prasad Dubey, in their statements had clearly stated that they had not signed the forms under Section 187C of the Companies Act. The statements of Robin Gupta and Radhika Prasad Dubey have been quoted in the assessment order. (vi) The Government Examiner of Questioned Documents had affirmed that the forms submitted under Section 187C were not signed by Robin Gupta and Radhika Prasad Dubey. (vii) Robin Gupta had denied that he was a nominee of Sunair Hotels Limited and stated that he was a shareholder in his individual capacity. (viii) Radhika Prasad Dubey in his statement stated that he had worked with V.K. Bindal & Company, Chartered Accountant and had signed the Memorandum and Articles of Association but had no association with Sunair Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent assessee. This would determine the real ownership of the respondent assessee. The payment of share capital was made by cheque and the copy of the receipt issued by the Registrar of Companies had been filed. This aspect was not controverted and denied by the Assessing Officer, while denying benefit under Section 47(v) of the Act. Section 187C of the Companies Act is a procedural provision and the requirement of the Companies Act cannot be imported and considered for examining whether conditions under Section 47(v) of the Act were fulfilled or not. As far as forgery of signatures and discrepancy in the minutes books was concerned, it was for the authorities under the Companies Act to take notice and action. However, having regard to the provisions of Section 47(v), this aspect was immaterial. Investment in the shares was made by the holding company, Sunair Hotels Ltd., and this position was reflected in the books of both the respondent assessee and Sunair Hotels Limited. Robin Gupta had not stated that he had made payment for 100 shares out of his own funds and had not shown or claimed ownership of shares in his balance-sheet. Addition of Rs.21 crores was treated as unwarrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subscribers to its share capital. During the year 1994-95 M/s Sunaero Ltd. transferred the hotel development rights back to M/s Sunair Hotels Ltd. for a consideration of Rs.21 crores. This amount was declared to be the profits in the annual financial statement of M/s Sunaero Ltd. for the year ending 31.3.95. However, this amount was claimed to be exempt from Capital Gains Tax u/s 47(v) of the I.T. Act in the return of its income filed for A.Y. 1995-96. Whereas, under the section any capital gains arising out of transfer of capital assets from a wholly subsidiary company to its holding company is not liable to gain tax. As discussed hereinabove, the assessee from the above mentioned evidence was able to show that the holding company was holding the whole of the share capital of the subsidiary company and the payments towards the share capital of the assessee too was made by M/s Sunair Hotels Ltd. The AO without examining other six subscribers to the share capital, simply on the basis of the statement of Shri Robin Gupta has tried to establish that the shars of the company were held in the name of the 7 subscribers and not as nominee. On analyzing the statement of Shri Robin Gupta we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was shown by him in his balance sheet indicating the ownership of the same. 14. For the reasons stated above we are of the opinion that in the existing facts and circumstances, the assessee has been able to establish that the capital gains of Rs.21 croresarising out of transfer of the capital assets from a wholly-owned subsidiary company to its holding company was not liable to capital gains tax as per the provisions of sec. 47(v) of Income Tax Act, 1961. Accordingly, the order of CIT(A) in this regard is upheld and grounds of appeals taken by the Revenue are rejected." 11. Before us, the Revenue has filed three paper books, Paper Book - I, Paper Book - II and Paper Book - III. The respondent assessee has also filed a paper book. We are only entitled to refer and have examined the documents filed and available to the tribunal, when we examine the question of perversity. Of course, the orders passed by the Assessing Officer and the CIT(A) can be referred to. 12. In order to decide the issue in question, we would like to point out the contentions raised on behalf of the Revenue, which are as under:- (i) Sunair Hotels Limited was not a shareholder of the respondent assessee. It do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned Documents, have been ignored and not given due credence. (x) The declaration under Section 187C was not filed in time, and in at least two cases, signatures were forged on the form filed with the Registrar of Companies. The reports and findings made by the Department of Company Affairs have been ignored. (xi) On the date when the shares were issued, the respondent assessee did not have a bank account and the payments were made in cash. There is nothing to show that the payments towards share application money were made by Sunair Hotels Limited. The ledger account of the respondent assessee in the books of Sunair Hotels Limited, relied upon, does not support the contention that the Sunair Hotels Ltd. had made payment for the shares. 13. Learned counsel for the respondent assessee has submitted and raised the following contentions:- (i) Appeal under Section 260A is maintainable only on substantial questions of law. Findings of facts cannot be re-appreciated. In the present case, there are concurrent findings of both, CIT(Appeal) and the tribunal in favour of the assessee. Reliance is placed on Janardhana Rao (M) vs. Joint CIT, (2005) 273 ITR 50 (SC), CIT vs. P. Mohankala, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Sunair Hotels Ltd. wanted to incorporate its subsidiary. The agreement dated 17th June, 1993, between Sunair Hotels Ltd. and Aeroflot also discloses the intention to create a subsidiary. Letters dated 2nd May, 1995 and 31st May, 1995 written by Sunair Hotels Ltd. and the assessee to Ministry of Industries affirms and admits that the respondent assessee was a wholly owned subsidiary of Sunair Hotels Ltd. (vii) Ministry of Industry's letter dated 27th June, 1995, acknowledges that Sunair Hotels Ltd. was the holding company of the respondent assessee. This was also acknowledged in the Ministry of Industry's letter dated 24th May, 1995. Internal note of Law Department of NDMC also records that the respondent assessee was to be established as a subsidiary of Sunair Hotels Ltd. (viii) The entire fund for establishment and incorporation of the respondent assessee was provided/incurred by Sunair Hotels Ltd. Share application money of Rs.7,000/- was also recorded and shown in the balance sheet and books of accounts of Sunair Hotels Ltd. (ix) In the balance sheet of Sunair Hotels Ltd. as on 31st March, 1995 and 31st March, 1994, the assessee was shown as a wholly owned subsidiary. These ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has been condoned. The forms purchased from Jain Book Agency were filled up on the basis of earlier declarations taken on plain paper dated 23rd October, 1993. Thus, the aforesaid date was mentioned on the forms. This aspect, therefore, does not negate the respondent assessee's claim that it was a wholly owned subsidiary. (xx) Statement of Radhika Prasad Dubey does not support the department's case. 14. At the very outset, we may record that several issues and contentions raised by the appellant/Revenue and the respondent/assessee have not been recorded or dealt with by the CIT(Appeals) or the tribunal. These remain unnoticed and have not been adverted to, considered and evaluated. The tribunal has also not dealt with various legal issues and contentions raised by both sides. A reading of the order passed by the tribunal shows that same is cryptic as also factually wrong and incorrect on factual conclusions/findings recorded. 15. We have quoted Section 47(v) of the Act. To claim benefit under the said Section respondent assessee must be a wholly owned subsidiary of the holding company. Merely because the respondent assessee was a subsidiary of Sunair Hotels Ltd., benefit unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AS ON ………. 23/12/94 TIME 14.54.49 Pg. No. 29 Voucher No Date Narration Bill No. Bill Dt. Cheque No. Cheque Date Debit Credit Balance 65 15/10/93 DD FVR ROC P&H FOR SUN AERO LTD. 38020.00 38020.00 66 17/10/93 PRDF CGHS TO VKB & CO. FR REGIN OF SUNAERO LTD. 19480.00 57500.00 83 30/11/93 CHQ PD FR MOA PTG FR SUN AERO THRU TRANSASTA 832037 30/11/93 17500.00 75000.00 149 31/03/94 RECT FR ALLOT. OF 700 SH @ 10/- SUN AERO LTD. 7000.00 68000.00" 18. The said ledger account would reveal that on 15th & 17th October, 1993, two debit entries of Rs.38,020/- and Rs.19480/- were made as payments forwarded to the Registrar of Company for registration of the respondent assessee. The next entry of Rs.17,500/- is made on 30th November, 1993, as Cheque paid on behalf of the respondent assessee. The aforesaid payments would only show that the respondent assessee was liable to pay Rs. 75,000/- to Sunair Hotels Ltd. who had made the said payments or had provided funds or was a creditor. The last entry on 31.3.1994 relates to Rs.7,000/- and is on the credit side. As per the said entry, the same was made for allotment of 700 shares @ Rs.10/- each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of Robin Gupta. The Revenue submits that at best this is a neutral factor. But from the said factum, no inference or legal conclusion can be drawn that Sunair Hotels Ltd. was the beneficial shareholder. This was and would be an erroneous conclusion. 21. Normal presumption in law is that the registered shareholder holds the share in his own right and in his individual/ personal capacity. He does not hold shares as a nominee of a third person. It is the contrary which has to be proved by the party who claims or asserts that the recorded shareholder is a nominee. The onus is, therefore, on the party who claims to the contrary. The said party has to lead evidence sufficient in law to enable the authorities/tribunal to come to the conclusion that it/she/he has discharged the onus. The evidence should be such that it can be held that the shares were not held by the shareholder in his individual/ personal capacity but as a nominee of the third person. [See In Re: Dinshaw Maneckjee Petit Bart, AIR 1927 Bom 371] 22. It was recorded that the receipts were issued by Registrar of Companies. This is again factually incorrect. It is not case of the respondent assessee that the Registrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-existent/void. The finding of the tribunal is to the contrary. The tribunal has further recorded that the Assessing Officer did not examine the six other subscribers to the share capital. This is factually incorrect. The Assessing Officer had examined and even quoted, the statement made by one more subscriber namely Radhika Prasad Dubey. The tribunal has probably not examined and not gone through the statement of Radhika Prasad Dubey, which has been quoted in the assessment order itself. For benefit under Section 47(v), the subsidiary must be wholly owned subsidiary. Being a subsidiary is not sufficient. Thus even if one of the shareholders was not a nominee of the holding company, benefit under Section 47(v) has to be denied. 25. Thereafter, the tribunal has recorded that the question of real ownership of shares should have been ascertained by the Assessing Officer but he has failed to do so. As noticed and held above, there is no presumption that the registered shareholder is a nominee of a third person. In case of a dispute, the person who claims to the contrary has to establish and show that the person mentioned in the register of shareholders was his nominee. The onus is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. The Act, i.e. Income Tax Act, 1961, deals with and relates to taxation of income. For the purpose of determining taxable income, provisions and parameters/stipulations have been made/prescribed in the Act. In a given case, however, the authorities under the Act (i.e. Income Tax Act) may have to examine provisions of other enactments, when required and necessary. The term "subsidiary" or "wholly owned subsidiary" have not been be defined in the Act i.e. the Income Tax Act. Therefore, reference is to be made to the other Acts and in this case, the Companies Act. Effect of the violation of Section 49 and 187C of the Companies Act is one aspect but the other issue, which has to be examined, is the evidentiary value and the effect when no such declaration was initially made and the subsequent filing of the declaration is disputed and contested. It is claimed that the signatures on the forms/declarations made were forged and fabricated. The tribunal is required to examine and consider whether the said conduct, reflects and is of relevance. 29. The last part of paragraph 13 refers to the statement of Robin Gupta and states that the tribunal had analyzed the statement and it cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at emerges on the authorities may thus be summed up: (1) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the court under Section 66(1). (2) When the point for determination is a mixed question of law and fact; while the finding of the Tribunal on the facts found is final its decision as to the legal effect of those finding is a question of law which can be reviewed by the court. (3) A finding on a question of fact is open to attack, under Section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse. (4) When the finding is one of fact, the fact that it is itself in inference from other basic facts will not alter its character as one of fact." 32. In case of pure question of facts, inference from proved facts is a question of fact. However, as observed in Bomford versus Osborne, (1942) 10 ITR [E.C.] 27 there can be cases where inferences drawn from proved or admitted facts, can give rise to question of law when facts proved or admitted, do not provide and do not support, the conclusions of fact. A finding of fact can be chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icially could act upon the record before him, have reached the conclusion arrived at by the tribunal/authority [see CIT versus S.P. Jain, (1973) 87 ITR 370 (SC)]. 36. We are conscious that it has been observed that the order must be read as a whole to see whether the test of perversity is satisfied but in the present case when we apply the test expounded in Dhirajlal Girdharilal (supra) and Daulat Ram Rawat Mull (supra) and also read the order as a whole, we reach the affirmative opinion in favour of the appellant-Revenue. It is the aforesaid test, which has been applied by us in our conclusion recorded above. 37. In view of the aforesaid discussion, we answer the second question of law in affirmative, i.e., in favour of the appellant-Revenue and against the respondent-assessee. The first question is answered with the order of remit as it would be better and appropriate if the entire issue is examined threadbare by the tribunal. It would not be proper for us to decide the said question without elucidation and finding of facts being firmly recorded by the tribunal. We refrain from carrying out the said exercise as the tribunal is the final fact finding authority. They should recor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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