9911796707
TMI Blog2016 (1) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... mputed by the Appellant." 4. Briefly stated the facts of the case are that the assessee is in the business of production of Television programs, Air time sales, movie production and distribution of films. The return for the year was filed at a loss of Rs. 21,01,75,216/- under normal provisions of the Act and the Book profit was returned at Rs. 19,44,37,860/- u/s. 115JB of the Act. 4.1. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee. 4.2. While scrutinizing the return of income, the Assessing Officer noticed that during the year the assessee has sold entire share holding in its 100% subsidiary United Home Entertaining Ltd (UHEL) to a third party. On this sale of entire share holding, the assessee worked out capital gains u/s. 48 of the Act which read as under: Actual cost of shares Equity shares 490000 (2004-05) Rs. 49,00,000 Preference shares (acq. 1.4.2005) Rs. 19,51,00,000 Indexed cost Equity shares Rs. 52,98,125 Preference shares Rs. 20,37,36,217 Rs. 20,90,34,342 cost Sale consideration (net of expense in connection with sale Rs. 45,84,44,579 Rs. 45,84,44,579 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. Counsel also relied on the decision of the Hon'ble Supreme Court in the case of Vodafone International Holdings Vs Union of India And Another 341 ITR 01 and Hon'ble Karnataka High Court in the case of Bhoruka Engineering Indus. Ltd. 356 ITR 25. 6.1. The Ld. Counsel drew our attention to the sale and subscription agreement between the Walt Disney Company (South East Asia) Pte Ltd (Purchaser) and Zarina Mehta, Ronnie Screwvala, Unilazer Exports & Management Consultants Ltd, UTV Software Communications Ltd (assessee) - collectively known as the 'Sellers' and United Home Entertainment Ltd. The Ld. Counsel continued to state that Unilazer Export holding 50% shares, the assessee is holding 49% shares and others are holding 1% share in the Company United Home Entertainment Ltd (UHEL). The Ld. Counsel further clarified the fact that the share in UHEL were transferred by the assessee to Walt Disney Company. Thus, what have been transferred are the shares in UHEL when UHEL is still in existence. Therefore, it cannot be said that the assessee has transferred any undertaking which would come within the purview of definition of slump sale as given u/s. 2(42C) of the Act. The Ld. Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given to the provisions contained in the second proviso to section 48. (3) Every assessee, in the case of slump sale, shall furnish in the prescribed form along with the return of income, a report of an accountant as defined in the Explanation below sub-section (2) of section 288 indicating the computation of the net worth of the undertaking or division, as the case may be, and certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at in accordance with the provisions of this section." 8.2. Now let us see the definition of slump sale given in Sec. 2(42C) of the Act which reads as under: "slump sale" means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales Explanation - 1. For the purposes of this clause, "undertaking" shall have the meaning assigned to it in Explanation 1 to clause (19AA) : Explanation - 2. For the removal of doubts, it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the affairs of the company and are entitled, as provided by the articles of association, to declare that dividends should be distributed out of the profits of the company to the shareholders but the interest of the shareholder either individually or collectively does not amount to more than a right to participate in the profits of the company. The company is a juristic person and is distinct from the shareholders. It is the company which owns the property and not the shareholders." 8.7. This view is further fortified by the decision of the Hon'ble High Court of Bombay in the case of Brooke Bond India Ltd (supra) wherein, inter alia, one of the contention before the Hon'ble High Court was that the agreement is illegal and unenforceable as it is contrary to Sec. 293(1)(a) of the Companies Act. The observations of the Hon'ble High Court reads as under: " The first contention is that, u/s. 293(1)9a), the Board of Directors of the first defendants, a public company, is prohibited from selling, leasing or otherwise disposing of the whole, or substantially the whole of the undertaking of the company and, hence, the agreement was ultra vires power of the board of directors of the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the transaction. In the absence of a permanent establishment profits were not attributable to Indian operations. The Department had failed to establish any connection with section 9(1)(i) . Under the circumstances, section 195 was not applicable". 8.11 A similar view has also been taken by the Hon'ble High Court of Karnataka in the case of Bhoruka Engineering Indus. Ltd (supra). "The language employed in section 10(38) of the Act is simple and unambiguous and it makes no distinction between the transfer of share of company with an immovable asset and movable asset, instead of executing a sale deed in respect of the immovable property by the company, which is owning the land. If the shareholder chooses to transfer the lands and part with the land to the purchaser of the shares, it would be a valid legal transaction in law and merely because they were able to avoid payment of tax, it cannot be said to be a colourable device or a sham transaction or an unreal transaction. As set out above, the transaction is real, valuable consideration is paid, all legal formalities are complied with and what is transferred is the shares and not the immovable property. The finding of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
