TaxTMI 
TaxTMI 
2014 (4) TMI 436
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....istered as a private limited company wherein the total shares were 76,36,000. The NTT Communications Corporation, Japan hold 76,35,999 equity shares of the assessee company and one equity share is held by the Managing Director as the nominee of NTT Communications Corporation, Japan. As per the assessee, the money for allotment of one equity share to MD of the assessee company was paid by NTT Communications Corporation, Japan and this one equity share to MD of the company was allotted in the capacity of the nominee to meet the requirement of having minimum two shareholders in the case of a private limited company in view of Section 12 of the Companies Act, 1956. As per assessee, this fact has been clearly mentioned in the Memorandum & Articl....
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....ide India". I have also gone through the merits of the contention of the appellant that holding the entire share capital is different from holding the entire share capital in the name of the holding company. I have also considered the judgement in the case of CIT vs Papilion Investments Pvt. Ltd, Mumbai High Court. The Hon'ble Court gave the following finding in that case:- "As a matter of fact, there cannot be any company in India which has less than two members i.e. shareholders. Now the requirement of section 4(7) is that the whole of the share capital of the subsidiary company should be held by the holding company. The whole of the share capital being held by the holding company is certainly not the same thing as whole of the shar....
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....y of NTT Communications Corporation, Japan. It would thus not be a subsidiary of a public company under section 4. Accordingly, the restrictions of the Act relating to managerial remuneration as stated in Section 198 with schedule Xlll to the Companies Act, 1956 would not apply to it for the financial year ended 31 March 2006". I have also gone through the second additional evidence filed by the appellant in the form of clarification received from the Ministry of Corporate Affairs. Clarifications have been received in the case of Musashi Auto Parts India Pvt. Ltd. In the aforementioned case, the entire share capital of the company was held \ by the holding company directly to the extent of 99.975% and balance .025% was held through two dir....
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....al remuneration. The managerial remuneration of Rs.37,37,859/- paid by the appellant to its managing director is admissible u/s 37(1) of the Income Tax Act. Accordingly, the addition made by the AO is deleted." 3. Now, the revenue is in appeal in both the years by taking the following grounds, which are common in both the years except the difference in the amount :- "1. That on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the disallowance (Rs.37,37,859/- in AY 2006-07 & Rs.14,37,588/- in AY 2007- 08) made by the AO on account of managerial remuneration by holding inadmissible u/s 37(1) of the Act. 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that....
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....minimum two shareholders in the case of a private limited company in view of Section 12 of the Companies Act. This fact has been clearly mentioned in the Memorandum & Article of Association. Further, the Ministry of Corporate Affairs has also clarified on this issue. Hon'ble Mumbai High Court in the case of CIT vs. Papilion Investments Pvt. Ltd. has held as under :- "As a matter of fact, there cannot be any company in India which has less than two members i.e. shareholders. Now the requirement of section 4(7) is that the whole of the share capital of the subsidiary company should be held by the holding company. The whole of the share capital being held by the holding company is certainly not the same thing as whole of the share capital....