9911796707
TMI Blog2016 (1) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT(A)-3, Mumbai dated 21.2.2013 pertaining to Assessment year 2007-08. 2. The assessee has raised two substantive grounds of appeal. At the very outset, the Ld. Counsel for the assessee stated that under the instructions from his client (assessee), he is not pressing ground No. 2, the same is dismissed as not pressed. 3. The only surviving ground reads as under: Based on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in treating the sale of shares by the Appellant of its joint venture company, United Home Entertainment Ltd.(UHEL), as transfer of an undertaking ( i.e. slump sale u/s. 2(42C) of the Act) and hence, determining the capital gain tax liability u/s. 50B, instead of section 48 of the Act as computed 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 ₹ 21,01,75,216/- under normal provisions of the Act and the Book profit was returned at ₹ 19,44,37,860/- u/s. 115JB of the Act. 4.1. The return was selected for scruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25,49,00,000/- Net sales consideration 45,84,44,579/- Capital gain-short term 20,35,44,579/- 5. Aggrieved by this, the assessee carried the matter before the Ld. CIT(A) and reiterated its claim but without any success. 6. Before us, the Ld. Counsel for the assessee vehemently submitted that provisions of Sec. 50B of the Act which relate to the computation of capital gains in case of a slump sales is not at all applicable on the facts of the case. It is the say of the Ld. Counsel that what the assessee has sold is the shares in UHEL which cannot be considered as a transfer of any undertaking within the definition of slump sale given u/s. 2(42C) of the Act. The Ld. Counsel continued stating that when the shares of a company are bought, it cannot be said that the share holder acquired any interest in the assets of the company, therefore by the same analogy when the shares are transferred, it cannot be said that the assessee has transferred the assets of the company. For this proposition, the Ld. Counsel relied upon the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the orders of the authorities below. With the assistance of the Ld. Counsel, we have also gone through the relevant documentary evidences brought on record before us. 8.1. There is no dispute that the assessee has transferred its shares in UHEL in the name of the Walt Disney Company. The point for consideration before us is whether this transfer of shareholding would amount to transfer of an undertaking to bring the transaction within the ambit of Sec. 50B qua Sec. 2(42C) of the Act. Sec. 50B read as under: Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to incometax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place : Provided that any profits or gains arising from the transfer under the slump sale of any capital asset being one or more undertakings owned and held by an assessee for not more than thirty-six months immediately preceding the date of its transfer shall be deemed to be the capital gains arising from the transfer of short-term capital assets. (2) In relation to capital assets being an un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by UHEL and not the assessee because it is UHEL which has been transferred and being a distinct legal entity is entitled for the sale consideration of its transfer. However, this is not the case since the shares were transferred by the assessee, assessee received the sale consideration. 8.6. Shareholders right has been explained in detail by the Hon ble Supreme Court in the case of Mrs. Bacha F. Guzdar (supra) and the observations of the Hon ble Supreme Court read as under: That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept the contention that the shareholder acquires any interest in the assets of the company. The use of the word assets in the passage quoted above cannot be exploited to warrant the inference that a shareholder, on investing money in the purchase of shares, becomes entitled to the assets of the company and has any share in the property of the company. A shareholder has got no interest in the property of the company though he has undoubtedly a right to participate in the profits if and when the company decides to divide them. The interest of a shareholder vis-a-vis th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asset independent of the holding of shares. The control of a company resides in the voting power of its share holders and shares represent an interest of a shareholder which is made up of various rights contained in the contract embedded in the articles of association. The right of a shareholder may assume the character of a controlling interest where the extent of the shareholding enables the shareholder to control the management. Shares, and the rights which emanate from them, flow together and cannot be dissected. The tax consequences of a share sale would be different from the tax consequences of an asset sale. A slump sale would involve tax consequences which could be different from the tax consequences of a sale of assets on itemized basis 8.9. In the very same order, the Hon ble Supreme Court further held that the subject matter of the transaction was the transfer of the share in CGP (a company incorporated in Cayman Islands). Consequently, the Indian tax authority had no territorial tax jurisdiction to tax the offshore transaction . 8.10. In the very same order again the Hon ble Supreme Court held as under: That the transaction in question was one of o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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