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TMI Blog2013 (9) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case the Income Tax Appellate Tribunal was right in law in holding that the transmission of shares by the appellant to its wholly owned subsidiary company would amount to transfer and that there was a deemed gift involved therein? 2. Whether on the facts and in the circumstances of the case the Appellate Tribunal was right in law in holding that difference between the book value of the shares and the market value would be a deemed gift? 3. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in not lifting the corporate veil and thereby holding that there was a transfer?" 2. The assessment is under the provisions of the Gift Tax Act. It is stated that the assessee is a holding company. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the decision reported in 70 ITR 397 S.R.CHOCKALINGA CHETTIAR v. CIT and held that when the consideration received by the assessee was far less than the market value, Section 4 of the Gift Tax Act stood attracted. The issue raised in the appeal was not relating to Income Tax Act, but one under the Gift Tax Act. Consequently, the provisions of Gift Tax Act alone would apply. Thus, the appeal filed by the assessee was rejected. 4. Aggrieved by the same, the assessee went on further appeal before the Income Tax Appellate Tribunal. The Tribunal pointed out that the assessee transferred its rights at Rs.5/- per share as against the market value of Rs.28/- per share as quoted in the Madras Stock Exchange as on 3.9.1993. By transferring the righ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had claimed capital loss on the transfer of shares to the subsidiary company. By order dated 30.7.2004 in MP.No. 237/ Mds/ 2003 deleting the said paragraph, the Tribunal nevertheless reconfirmed its original view that the transaction in question attracted the provisions of the Gift Tax Act, that the transaction of the assessee company was not one of the transactions included under Section 45 of the Gift Tax Act to claim non-liability. It however pointed out that it was not known whether the Assessing Officer had adopted the market value determined under the Income Tax Act. Though Schedule II of the Gift Tax Act provided for the method of valuation for the purpose of gift tax, yet, if any fair market value was fixed in the Income Tax p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rice, rightly the Assessing Officer invoked Section 4 of the Gift Tax Act. Pointing out to the definition of 'transfer of property' as appearing in Section 2(xxiv) of the Gift Tax Act and read in the context of Section 45 of the Income Tax Act providing for transactions excluded from the provisions of Gift Tax Act and the present transaction between the holding company and the subsidiary company not being of one such excluded transaction, rightly the assessment was made on the assessee adopting the market value. He further pointed out that even going by the Schedule II of the Gift Tax Act in the case of quoted shares, when the quotation as on the date of the transaction is available at the Stock Exchange, no exception could be taken to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Given the fact that in law, a subsidiary company, even if 100% wholly owned by the holding company, is an independent entity and given the fact that the assessee itself recognised that the transfer of shares to the subsidiary company is at the value noted in the books of accounts of the assessee company, we do not find any justifiable ground to accept the plea of the company based on Section 47 of the Income Tax Act. It is no doubt true that under Section 47(iv) of the Income Tax Act, for the purpose of capital gains, the transfer of capital asset between the holding company to subsidiary company is not treated as a transfer. But the relevance of Section 47 of the Income Tax Act has to be seen only in the background of the provisions r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions or the existence of two entities. In the circumstances, we reject the third question of law raised in this Tax Case Revision. 9. As far as the applicability of the decision of the Calcutta High Court reported in (1980) 124 ITR 660 GIFT TAX OFFICER v. VENESTA FOILS LIMITED is concerned, we do not think that it would be proper to read a single sentence out of context, as the said decision was arrived at based on the facts narrated therein. Thus, the decision of the Calcutta High court has no bearing to the facts herein. The Calcutta High Court pointed out that in the assessment made on the capital gains on the sale of shares of the holding company to the subsidiary company, the Income Tax Officer accepted the value as given by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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