TaxTMI 
TaxTMI 
2007 (1) TMI 107
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....s a company incorporated in Germany. Aventis Pharma Holding GmbH (APH) which got amalgamated with the applicant, effective on and from 30.09.2005, is a hundred per cent subsidiary of the applicant. By virtue of the amalgamation, all the assets and liabilities of APH became the assets and liabilities of the applicant. APH held 11,538,342 shares of Aventis Pharma Ltd. (APL) an Indian company listed on Mumbai Stock Exchange. As a result of amalgamation, the shares of APL held by APH vested in the applicant and since the applicant was the only shareholder of APH, no share was issued to any third party consequent to the amalgamation. It is stated that by virtue of section 11 of the German Reorganization Tax Act, the amalgamatio....
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.... answer to question 1 is in the affirmative and to question 2 in the negative, whether the tax rate of 10 per cent can be applied to the capital gains under the proviso to section 112(1) of the Income-tax Act if the tax so computed is lower than the tax at the rate of 20 per cent computed as per section 112(1) (c) of the Act? 2. No comments have, however, been received from the Jurisdictional Commissioner. 3. In the application, with regard to the first question, it is submitted that since the entire assets and liabilities of APH vested in Hoechst GmbH and no consideration accrued to APH, no capital gains chargeable under section 45 arose to APH. With regard to the second question, it is submitted that section 47 of the Act deals w....
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...., the Court might modify the language used by the legislature so as to achieve the intention of the Legislature and produce a rational construction." In view of the above, it is submitted that condition (a) will not apply in applicant's case where a wholly owned subsidiary amalgamates with its holding company. Accordingly transfer of shares of APL under the scheme of amalgamation would be exempt from capital gains tax. For this preposition the applicant has also placed reliance on the ruling given in the case of P-3 of 1994 240 ITR 518 (AAR), the facts of which are stated to be identical. With regard to the third question it is submitted that capital gains will be computed in accordance with the first proviso to section 48. Fur....
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....ny, therefore, computation provisions fail completely. For this proposition, reliance is placed on the decision of the Hon'ble Supreme Court in B.C.Srinivas Setty [128 ITR 294]. It was further argued by the learned counsel that assuming for a moment that the applicant is chargeable for capital gains under the provisions of the Act, then section 47(via) read with section 2(1)(b) provides a specific exemption in the case of the applicant. The learned counsel explained that basically there is a transfer only in so far as the shares of Indian company held by one German company are taken over by another German company, which is the sole shareholder of the amalgamating company. Since no consideration has passed over to the amalg....
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....here is no complete destruction of the corporate personality of the transferor-company but instead there is a blending of the corporate personality of one with another corporate body and it continues as such with the other is not sustainable in law. The true effect and character of the amalgamation largely depends on the terms of the scheme of merger. But there cannot be any doubt that, when two companies amalgamate and merge into one, the transferor-company loses its entity as it ceases to have its business. However, their respective rights and liabilities are determined under the scheme of amalgamation but the corporate entity of the transferor-company ceases to exist with effect from the date the amalgamation is made effectiv....