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TMI Blog2012 (8) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... o be same as if it would have been if the transferor company had continued to hold the capital asset. 2. The relevant facts are that assessee acquired certain assets from Tata Motors Limited (TML) in the year under consideration i.e. F.Y. 2006-07. Since assessee was 100% subsidiary of TML during the financial year 2006-07, depreciation on the assets so acquired was claimed on the Written Down Value (WDV) as appearing in the books of TML, though the assessee had acquired those assets at a higher price than the cost of the assets to TML. The said depreciation was claimed at WDV as per Explanation 6 to sub-section (1) of Section 43 of the Income tax Act. In the subsequent period i.e. F.Y. 2007-08, TML transferred certain shares of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uarely covered in favour of the assessee by the decision of ITAT in the case of Essar Oil Ltd (supra). He further submitted that Hon ble Bombay High Court has confirmed the said order of ITAT in the appeal filed by department vide order dt.7.7.2011 in Income tax Appeal No.3160 of 2010. Ld A.R. referred the provisions of section 47A(1)(ii) and submitted that as per section 49(3) of the I.T.Act, the cost of acquisition acquired by the assessee from TML should be the cost for which such assets were acquired by it as TML transferred some of the shares of the assessee company to another company namely TSL before expiry of period of eight years. As such, assessee company ceased to be 100% subsidiary of TML. 6. We have carefully considered subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elates to the value of the in the hands of the assessee for the purpose of computing the depreciation. In the present case, the following undisputed facts arise :- (i) As on the date of transfer i.e., 30-5-1999,(correct date is 30.5.1992 appears to be typographical mistake) the transferor company M/s. Essar Gujarat Ltd. is the 100% holding company of its subsidiary M/s. Essar Oil, the transferee company and the assessee herein. (ii) The transferee company ceased to be the wholly owned subsidiary of the transferor company in September, 1994. (iii) The Energy and Offshore divisions of the holding company were taken over by the assessee as going concerns. Thus, the assessee has taken over the assets of the holding company a division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtion of Explanation (6) to sub-section (1) of section of the Act, that in such cases the WDV in the hands of the transferor company, shall be the cost of Acquisition in the hands of the transferee company. The Assessing Officer s action is right as far as the situation as the date of transfer is concerned. But by 30-9-1994, the assessee company ceased to be the subsidiary of the transferor holding company. Section 47 grants exemption from section 45 while section 47A withdraws exemption granted under section 47 on the occurrence of the events mentioned therein. Section 47 reads as under :- 47. Nothing contained in section 45 shall apply to the following transfers: (i) to (iii) (iv) any transfer of a capital asset by a company to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the income goes back to the date of transfer. Thus, provisions of section 47 are withdrawn on occurrence of the events mentioned under section 47A and the transaction has to be treated as a transfer under section 47(v) or (vi) of the Act as the case may be and the transferor company is liable to pay the capital gains tax. In the present case due to seizure of the assessee-company being a subsidiary of the transferor company, the provisions of section 47(iv) have ceased to apply, and the transaction has to be considered as a transfer. Section 47A provides for withdrawal of exemption and the resultant treatment to be given to income in the hands of the transferor company. What is the consequential effect on the transferee company? What sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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