2004 (1) TMI 702

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..... cent subsidiary company, called M/s. Annamalaiar Textiles (P.) Ltd. The shares of the assessee holding company were held practically by two groups of shareholders, the majority shareholders called A group and minority shareholders called B group. Since all were not well and there were some differences of opinion, they thought it desirable to divide the companies among themselves. The result w .....

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..... ost of acquisition to bring the tax, the difference of ₹ 18,19,400 as capital gains. Of course, before the said officer, assessee-company put forth a plea that this was composite transaction and the payment of ₹ 42.45 lakhs was only to set off the advantage in profitability of the subsidiary company and was not a consideration for the transfer of shares. The assessee thereafter filed a .....

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..... fter the transaction and only the assets had been rearranged so that one group will have control over another company and the payment of ₹ 42.45 lakhs was made only to equalise the profitability of the company on expert advise. On behalf of the revenue, it was submitted that the transfer of the shares of the subsidiary company by the assessee holding company to the B group of shareholders .....

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..... ccordance with the directions that may be given by CBDT. 4. The present tax case has been filed by the CIT, Madurai, questioning the correctness of the order of the Tribunal. 5. We examined the agreement dated 1st June, 1985 and also considered the submissions made by the respective counsel. That the object of the agreement to divide the two companies between the two groups of shareholders f .....

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..... owners of the shareholding prior to the division, it was virtually a partition and not a transfer from one to another who had no pre-existing right in the asset. Obviously this is a peculiar case and the best course to be adopted is to direct the assessee to approach the CBDT under section 119(2)(b) so that the ITO can finalise the matter in accordance with the directions that may be given. The .....

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