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TMI Blog2017 (7) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... d Industries (P) Ltd.(GWI). The share holding patter of M/s.GWI is as under:- Mr.T.T.Varadarajan 50% Mrs.Maya Varadarajan 50% The share capital of the above subsidiary company was as follows:- 24,000 shares of Rs. 100 each - Rs. 24,00,000/- Both the above directors held 12,000/- shares each. 3.1 The above subsidiary company is a dormant company and holds land in Thuraipakkam on which the factory building owned by the holding company viz., M/s.Maya Appliances (P) Ltd. (MAL) is situated. The assessee company took the land on lease for an annual rent and constructed a building on the said lease hold land and treated it as an asset in its books, claiming depreciation on the same accordingly. M/s.Maya Appliances (P) Ltd. was holding 100% shares of its subsidiary M/s.General Wood Industries (P) Ltd. till February 2011. on 28.2.2011, the assessee company, M/s.Maya Appliances (P) Ltd. sold the shares of M/s.General Wood Industries (P) Ltd. at its prevailing book value to the following persons: (i) Mr.T.T.Varadarajan 12,000 shares @ Rs. 100 each -Rs. 12,00,000/- (ii) Mrs. Maya Varadarajan 12,000 shares @ Rs. 100 each-Rs. 12,00,000/- Thus the ownership of the company is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the present case is whether the transferees possess or enjoy the properties by merely owning the shares of the company. 3.4 It was submitted by Authorised Representative of assessee before the Ld.CIT(A) that in the case of companies holding immovable property, the share holders do not have any right over any of the assets of the company and hence, though the shares are transferred, rights of the assets of the company are not transferred. Admittedly in the present case there is no transfer of immovable property and the same continues to be the asset of the M/s.GWI. The assessing officer without considering the above legal aspect has gone on the presumption that sec 2(47)(vi) will apply even to transfer of shares without any direct right of owning or enjoying of the property of the Company. Normally the transfer of shares of a company does not enable the purchaser of shares to enjoy the immovable property. The share holders get a right over the property of the company only on its liquidation. It was observed by the Ld.CIT(A) that Section 2(47)(vi) of the Act reads as under: "(vi) any transaction (whether by way of becoming a member of, or cquiring shares in, a co-operative socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transfer of ownership is legally not permitted. A person holding the power of attorney is authorized the powers of owner, including that of making construction, The legal ownership in such cases continues to be with the transferor." 3.6 From the above Circular, he drew inference that this provision was introduced to prevent the avoidance of capital gains tax liability. This section will apply only to cases where the acquisition of shares in a company has the effect of transferring, or enabling the enjoyment of, any immovable property. Admittedly in the present case there is no transfer of immovable property and the same continues to be the asset of the M/s.GWI. According to Ld.CIT(A), the provisions of sec 2(47)(vi) are not attracted to the facts of the present case. 3.7 According to Ld.CIT(A), Chapter XX-C deals with purchase of immovable property by Central Government in certain cases. Under Sec 269 UA(2)(d) immovable property" means- "(I) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furnitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering Inds. Ltd. vs. DOT 356 ITR 25 (Kar). The facts in that case was assessee and other promoter shareholders were holding 98.73°k shares in "X", whereas public shareholders were holding remaining shares. In the AY 2006-07 Assessee sold its shareholdings in "X" to extent of 45,350 shares for net consideration of Rs. 20,29,08,626/- after paying Security Transaction Tax, Service Tax, etc. Assessee claimed gain on sale of shares as exempt from taxation u/s. 10 (38). AC held that impugned transaction was colourable devise and virtually immovable property had been transferred for consideration and assessee was liable to tax on short term capital gain on sale of immovable property as determined. CIT(A) as well as ITAT confirmed action of AC. The Hon'ble High Court held that, assessee was holding shares in "X" from 01.10.1984 and therefore, it was long term Capital asset and all three conditions stipulated u/s. 10(38) were fulfilled. Therefore, assessee was entitled to benefit flowing there from i.e., income from such transfer could not be included in total income of assessee for the previous year. Assessee by resorting to such tax planning, had taken advantage of benefit of law or l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land, building or both. In the present case assessee has offered income from capital gains on sale of shares. As there is no transfer of land or building or both in the present case, held that provisions of sec 50C are also not applicable to the facts of this case. Against this, the Revenue is in appeal before us. 5. We have heard both the parties and perused the material on record. In this case, the main contention of the ld.A.R is that the provisions of the section 50C does not attract to the transactions, which are not registered with the Stamp Duty Valuation Authority and there was no direct transfer of land and building or both. In the present case, the assessee company, sold the shares of M/s.General Wood Industries (P) Ltd., at its prevailing book value to the following persons:- Mr.T.T.Varadarajan 50% -12,000 shares at Rs. 100 - Rs. 12 lakhs Mrs.Maya Varadarajan 50% -12,000 shares at Rs. 100 - Rs. 12 lakhs Thus, the ownership of the company viz. M/s.General Wood Industries (P) Ltd., now owned by the above two persons jointly. According to ld. Assessing Officer, the assessee sold the actual land and building in the guise of sale of shares to the above persons and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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