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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 ..... : Mr.Pathlavatha Peerya, CIT Dr. For The Respondent : Mr.Vijayaraghavan, Advocate ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal of the Revenue is directed against the order of the Commissioner of Income-tax (Appeals)-IV, Chennai dated 21.08.2014 pertaining to assessment year 2011-12. 2. The grievance of the Revenue in this appeal is with regard to deletion of addition made under the head capital gains on sale of land. 3. The facts of the case are that the assessee is a manufacturing company involved in manufacture of mixture, induction stove, rice cookers etc., under brand name PREETHI . The share holding pattern of the assessee company is as indicated below:- Mr.T.T.Varadarajan 60% Mrs.Maya Varadarajan 20% Ms.Deepa Varadarajan 10% Mr.Siddaarth Varadarajan 10% The Company is holding company of its 100% subsidiary viz., M/s.General Wood Industries (P) Ltd.(GWI). The share holding patter of M/s.GWI is as under:- Mr.T.T.Varadarajan 50% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the guise of transfer of shares and is only an arrangement that is made by the assessee company, leading to evasion of tax. Aggrieved with the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). 3.3 On appeal, Ld.CIT(A) observed that the assessee company has a wholly owned subsidiary called M/s.General Wood Industries (P) Ltd., in which assessee has 100% share holding. The assessee company transferred the entire share holding of about 24,000 shares of Mr.T.T.Varadarajan and Mrs.Maya Varadarajan equally in the ratio of 60% 20% respectively. It is also not in dispute that the subsidiary company was a dormant company owning land leased to the assessee company in which assessee company had constructed a factory building. The issue that arises for consideration is whether by transfer of shares of the subsidiary company provisions of section 2(47)(vi) r.w.s.269 UA and sec 50C of the Act would be attracted. According to the assessing officer, assessee in the guise of transfer of shares of the company had indirectly transferred the immovable property to evade capital gains tax. Therefore what has to be seen in the present case is whether the transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a co-operative society, company, or association of persons or by way of any agreement or any arrangement whereby such person acquires any right in any building which is either being constructed or which is to be constructed. Transactions of the nature referred to above are not required to be registered under the Registration Act, 1908. Such arrangements confer the privileges of ownership without transfer of title in the building and are a common mode of acquiring flats particularly in multistore yed constructions in big cities. The definition also does not cover cases where possession is allowed to be taken or retained in part performance of a contract, of the nature referred to in s. 53A of the Transfer of Property Act, 1882. New subcis. (v) (vi) have been inserted in s. 2(47) to prevent avoidance of capital gains liability by recourse to transfer of rights in the manner referred to above, 11.2 The newly inserted sub-clause(vi) of section2(47) has brought into the ambit of transfer , the practice of enjoyment of property rights through what is commonly known as Power of Attorney arrangements. The practice in such cases is adopted normally where transfer of ownership is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es by merely owning the shares. 3.9 According to Ld.CIT(A), Sec 50C of the Act provides that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted [or assessed or assessable] by any authority of a State Government (hereafter in this section referred to as the stamp valuation authority ) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted [or assessed or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. It is settled issue that provisions of section 50C are deemed provisions and, therefore, same have to be interpreted strictly in accordance with spirit of provisions. 3.10 According to Ld.CIT(A), sec 50C applies only to a transfer of capital assets being land and building and not applicable to the facts of the present case where there is only transfer of shares and the ownership of property vests with M/s.GWI. 4. He has also taken support of the decision of the Hon ble Karnataka High Court in the case of Bhoruka Engine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r agreement was to transfer ownership of the two flats owned by the said company to the purchasers of the shares. He, therefore, held that it was a case of transfer of immovable property and the provisions of section 50C were applicable he adopted the stamp duty valuation of ₹ 4,12,16,500/- for the purpose of computation of Long Term Capital Gain arising from the transfer of the property which was allegedly effected in the garb of share transfer agreement as against the agreement value of ₹ 3,46,71,609/- shown by the assessee for transfer of shares. On appeal CIT(A) confirmed. The Tribunal held that the provisions of section 50C are deemed provisions and, therefore, the same have to be interpreted strictly in accordance with the spirit of the provisions, i.e expression transfer should be a direct transfer as defined u/s 2(47) which does not include transfer of shares the transfer of shares was never a part of the assessment of the Stamp duty Authorities of the State Government. 4.3 According to Ld.CIT(A), in the present case also what had been transferred is only shares of GWI and the ownership and possession and enjoyment of asset is with GWI and there is no direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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