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TMI Blog1988 (2) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... 1975-76, the appellant had raised as many as 15 grounds of appeal which in fact relate to only three points. Grounds pertaining to the nature of assessee's income earning activities and its claim for deduction u/s 80M of the IT Act. 1961 ('the Act') were not pressed before us and such grounds are, therefore, dismissed. 4. This leaves us with the grounds relating to the third point viz., assessee's claim for short-term capital loss amounting to Rs. 1,24,545 which arises in this appeal under the following circumstances. 5. The appellant is a Private Limited Company earning dividend and interest income from its activities of making or holding investments and financing industrial enterprises. It maintains its books of account on mercantile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Co., was a subsidiary company of the appellant yet the appellant did not hold all the share capital of the said subsidiary company and, therefor, the conditions laid down in sub-clause (a) of clause (iv) of section 47 was not fulfilled in the present case. The learned CIT (A), however, rejected this contention and held that M/s Ambernath Investments Pvt. Ltd. Co. was the wholly owned subsidiary company of one M/s Kaveri Investments Pvt. Ltd. which in its turn, was a wholly owned subsidiary company of the appellant-company. On these facts, the learned CIT (A) took the view that the provisions of section 47(iv) of the Act clearly stood attracted to the present case and the claim of the appellant had been rightly rejected by the ITO. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany should hold wholly all the share capital of the subsidiary company was not fulfilled and, therefore, the provisions of section 45 of the Act were applicable to the transfer of capital asset in question. 8. As against it Mr. P. D. Khandelwal, the learned departmental representative not only supported the order under appeal but also contended that it has been found by he learned CIT(A) as a matter of fact that M/s Ambernath Investments Pvt. Ltd. Co. was a wholly-owned subsidiary company of M/s Kavery Investments Pvt. Ltd., which, in its turn, was the wholly-owned subsidiary company of the appellant-company. And that clearly meant urged Mr. Khandelwal, that both the requirements of section 47(iv) were fully satisfied in this case. 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 47(iv) would not stand attracted and the transfer of capital asset would attract the provisions of section 45. Now in the Income-tax Act the definition of the term 'company' as given in section 2(17), includes ' an Indian company' and ' Indian company' has been defined in section 2(26) as meaning a 'company formed and registered under the Companies Act. 1956'. The terms 'parent company' and 'subsidiary company' as used in the language of clause (iv) of section 47, have not been defined in the IT Act and in this respect we agree with the learned CIT (A) that in order to understand their meaning and scope we shall have to go to the Companies Act, 1956. In the.Companies Act too the term 'parent company' has not been defined but it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses of this Act, a company shall be deemed to be the holding company of another, if but only if that other is its subsidiary." The definition of 'subsidiary company' as given in clause (c) of section 4(1) clearly covers the case of the appellant-company insofar as the question of M/s Ambernath Investments Pvt. Ltd., Co., being the subsidiary company of the appellant is concerned. The illustration given below clause (c) of section 4(1) brings it out clearly that the second subsidiary company shall also be the subsidiary of that company which is the holding company of this first subsidiary company. In other words, a company may have a number of subsidiary companies in the same line of succession. 10. Sub-section (4) of section 4 simply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on created by section 4, it would suggest that company A occupies the same position in its relation with company C as company B in fact does in its relation with company C as company B in fact does in its relation with company C. 12. Coming to the facts in the instant case it is the admitted position, as has been found by the learned CIT(A) and has not been disputed before, us, that Ambernath Investments Pvt. Ltd. Co., the transferee company, is the wholly owned subsidiary of M/s Kavery Investments Pvt. Ltd. Co. Kavery Investments Pvt. Ltd. Co., in its turn, is the wholly owned subsidiary of the appellant companies Act, 1956 the appellant-company enters into the shoes of Kavery Investments Pvt. Ltd. Co. insofar as its fiduciary relation w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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