What is the meaning of Wholly Owned Subsidiary Company for seeking Advance Ruling for the issues related to Service Tax, Central Excise, Customs and Income Tax etc?

What is the definition of wholly owned subsidiary company?

Surprise! The term "Wholly Owned Subsidiary Company" is neither defined in the Companies Act, 1956 nor under any other statute which refers this term for the purpose of "Advance Ruling"

As per the provision of the Companies Act, 1956, in no circumstances a person can hold 100% shares of a company.

 Now, the Advance Ruling Authority (AAR), New Delhi,  while disposing the application of M/s IJM (INDIA) INFRASTRUCTURE LIMTED reported in 2007 TMI (887) for seeking advnacr ruling for Applicability of Service Tax on Certain Issues, has held that to constitute a wholly owned subsidiary company, at least 99% of the shares of such company must be held by the Holding Company.

Wholly owned subsidiary concept clarified: authority requires near-total parental shareholding for advance ruling purposes. The term wholly owned subsidiary is not defined in the Companies Act, 1956 or other statutes for advance rulings; because absolute 100% ownership is not feasible under the Companies Act, the Advance Ruling Authority applied a functional approach, requiring an overwhelming majority shareholding by the holding company-a near-total parental stake short of absolute totality-to treat an entity as a wholly owned subsidiary for advance ruling purposes.