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TMI Blog2007 (1) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... RULING (By Mr. A.S.Narang) - In this case an application under section 245Q(1) of the Income-tax Act, 1961(for short the 'Act') has been filed on 6.6.2006, in Form No.34C (meant for non-resident applicants) seeking advance ruling from the Authority. The applicant, Hoechst GmbH, Germany, is a company incorporated in Germany. Aventis Pharma Holding GmbH (APH) which got amalgamated with the applicant, effective on and from 30.09.2005, is a hundred per cent subsidiary of the applicant. By virtue of the amalgamation, all the assets and liabilities of APH became the assets and liabilities of the applicant. APH held 11,538,342 shares of Aventis Pharma Ltd. (APL) an Indian company listed on Mumbai Stock Exchange. As a result of amalgamation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to question 1 is in the affirmative, whether the vesting of shares of Aventis Pharma Limited, India held by Aventis Pharma Holding GmbH in Hoechst GmbH pursuant to the scheme of amalgamation is exempt from capital gains tax under section 47(via) of the Income-tax Act? If the answer to question 1 is in the affirmative and to question 2 in the negative, whether the tax rate of 10 per cent can be applied to the capital gains under the proviso to section 112(1) of the Income-tax Act if the tax so computed is lower than the tax at the rate of 20 per cent computed as per section 112(1) (c) of the Act? 2. No comments have, however, been received from the Jurisdictional Commissioner. 3. In the application, with regard to the first qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing observation of the Hon'ble Supreme Court in the case of Commissioner of Income-tax v/s Gotla, 156 ITR 323: "Where the plain literal interpretation of the statutory provision produces a manifestly unjust result which could never have been intended by the Legislature, the Court might modify the language used by the legislature so as to achieve the intention of the Legislature and produce a rational construction." In view of the above, it is submitted that condition (a) will not apply in applicant's case where a wholly owned subsidiary amalgamates with its holding company. Accordingly transfer of shares of APL under the scheme of amalgamation would be exempt from capital gains tax. For this preposition the applicant has also placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable under the head "capital gains" shall be computed by deducting from the full value of the consideration received certain amounts as detailed in the Act. That in the present case no consideration has passed from amalgamated company to amalgamating company, therefore, computation provisions fail completely. For this proposition, reliance is placed on the decision of the Hon'ble Supreme Court in B.C.Srinivas Setty [128 ITR 294]. It was further argued by the learned counsel that assuming for a moment that the applicant is chargeable for capital gains under the provisions of the Act, then section 47(via) read with section 2(1)(b) provides a specific exemption in the case of the applicant. The learned counsel explained that basically there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en after amalgamation of the two companies, the transferor-company did not become non-existent but instead it continued its entity in a blended form with the appellant-company. The High Court's view that, on amalgamation, there is no complete destruction of the corporate personality of the transferor-company but instead there is a blending of the corporate personality of one with another corporate body and it continues as such with the other is not sustainable in law. The true effect and character of the amalgamation largely depends on the terms of the scheme of merger. But there cannot be any doubt that, when two companies amalgamate and merge into one, the transferor-company loses its entity as it ceases to have its business. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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