TaxTMI 
TaxTMI 
2019 (2) TMI 336
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.... proceed in accordance with law. The prayer has also been made to quash and set aside the proceedings initiated in pursuance of the impugned order dated 03.01.2018 rejecting the application of the petitioner-Company. 3. Brief facts pleaded in the writ petition, are that the petitioner is a company incorporated under the provisions of the Companies Act, 1956 having its registered office at A/34, Landmark City, Bundi Road, Kunhadi, Kota (Rajasthan). The Income Tax authorities carried search and seizure under Section 132 of the Act, 1961 at the premise of the petitioner-Company and its Directors namely Ram Jashandas Bhatia, Deepak Rajwanshi and Arun Mehta and other related Concerns on 03.03.2016. 4. The petitioner-Company has pleaded that on 31.10.2017, the petitioner-Company filed an application under Section 245C(1) of the Act, 1961 seeking settlement with the Income Tax Department for the Assessment Year 2010-11 to 2017-18 declaring additional income of Rs. 30,90,929/-. The petitioner-Company declared tax payable on declared income as Rs. 10,02,952/-. The Directors of the petitioner-Company namely Ram Jashandas Bhatia, Deepak Rajwanshi and Arun Mehta also declared additional ....
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..... The petitioner-Company has pleaded that the impugned order dated 03.01.2018 is patently bad and illegal and suffers from vice of non-application of mind, arbitrariness and apparent contradiction as Settlement Commission omitted to appreciate that in the present case, the Directors of the petitioner-Company and 'specified person' within the meaning of Section 245C of the Act, 1961 are the same. It is pleaded that Director of the petitioner-Company is having 100% interest in the business or profession of the specified person (which fulfills the condition of 'substantial interest', as defined in clause (B) of the explanation (b) to Section 245C(1) of the Act, 1961 and as per the petitioner- Company its case was squarely covered under clause (v) of explanation (a) to Section 245C(1) of the Act, 1961). 11. Counsel for the petitioner has raised following legal submissions before this court:- (i) The Settlement Commission failed to appreciate that the case of the petitioner-Company was squarely covered under clause (v) of explanation (a) to Section 245C(1) of the Act, 1961 and Director of the petitioner-Company and 'specified person' in the meaning of Section 245C are same. The Di....
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....ividual will be applicable to the present case of the petitioner-Company instead of general provisions of clauses (iv) and (v) of the explanation. 17. The respondents have further reiterated that clauses (iv) and (v) of the explanation govern those relations where there is an indirect link between the specified and related persons for the purpose of clause (ia) of Section 245C(1) of the Act, 1961 contrary to clause (vi) of the explanation, the same governs the relations where there is a direct link between specified and related persons. 18. The respondents have submitted that the taxing statues are to be strictly interpreted and there is no intention of the legislature for considering shareholding of one or more Directors cumulatively and if the legislature has not provided clubbing of the shareholding of different persons to determine substantial interest of the person, the same cannot be considered. 19. Counsel for the respondents Mr.Siddharth Bapna has opposed the prayer sought in the writ petition and has submitted that the impugned order, passed by the Settlement Commission, does not require any interference by this Court. 20. I have heard counsel for the parties. ....
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....ia),- (a) the applicant, in relation to the specified person referred to in clause (ia), means,- (i) where the specified person is an individual, any relative of the specified person; (ii) where the specified person is a company, firm, association of persons or Hindu undivided family, any director of the company, partner of the firm, or member of the association or family, or any relative of such director, partner or member; (iii) any individual who has a substantial interest in the business or profession of the specified person, or any relative of such individual; (iv) a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the specified person or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the specified person; or any director, partner or member of such company, firm, association or ....
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....e referred to in clause (ii) of that subsection, the amount of tax calculated under that clause as reduced by the amount of tax calculated on the total income returned for that year; (1D) Where the income disclosed in the application relates to more than one previous year, the additional amount of income-tax payable in respect of the income disclosed for each of the years shall first be calculated in accordance with the provisions of sub-sections (1B) and (1C) and the aggregate of the amount so arrived at in respect of each of the years for which the application has been made under subsection (1) shall be the additional amount of income-tax payable in respect of the income disclosed in the application. (2) Every application made under sub-section (1) shall be accompanied by such fees as may be prescribed. (3) An application made under sub-section (1) shall not be allowed to be withdrawn by the applicant. (4) An assessee shall, on the date on which he makes an application under sub-section (1) to the Settlement Commission, also intimate the Assessing Officer in the prescribed manner of having made such application to the said Commission. 21. This court finds from the ....
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....this court finds that the said contention is not to be accepted as capping of 20% is a requirement under the Act. 27. This court has taken into account the averment of the petitioner-Company where share percentage of three share holders is individually is under:- Ram Jashandas Bhatia - 7.3% Deepak Rajwanshi - 11% Arun Mehta - 11% 28. The bare perusal of definition of 'substantial interest, as per clause (a) of clause (vi) of Explanation to Section 245(1) of the Act, 1961 clearly reveals that a share holder should carry not less than 20% of the voting power of a Company. Clubbing of share holding by different share holders to make it 20% of having substantial interest, is not permissible under the law. 29. The submission of learned counsel for the petitioner that the relevant provisions need to be suitably read down to hold the petitioner-Company being covered under the expression, is wholly without substance. 30. This court also does not agree to the submission of learned counsel for the petitioner that alternatively, the case of the petitioner-Company will fall under clause (vi)(A) of Explanation of clause (1)(a) of Section 245C of the Act, ....
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.... (highlight & underlining supplied) 6. From a reading of clause (a) (vi) of the Explanation to subsection (1) to section 245C, it emerges that, if, (i) the specified person (being a company), that company; or (ii) the specified person (being a firm), that firm; or (iii) the specified person (being an association of persons), that association; or (iv) the specified person (being a Hindu undivided family), that family; or (v) any director of such specified person (company); or (vi) any partner of such specified person (firm); or (vii) any member of such specified person (association of persons); or (viii) any member of such specified person (Hindu undivided family); or (ix) any relative of such director of such a specified person (company); or (x) any relative of such partner, of such a specified person (firm); or (xi) any relative of such member, of such specified person (association of persons); or (xii) any relative of such member, of such specified person (Hindu undivided family), (highlight & underlining supplied) has a substantial interest, in the busin....
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....dually, however, these 3 Directors either do not have shareholdings in the 9 petitioners or their shareholding is less than 9%. Consequently, these Directors do not have a substantial interest in either of the 9 petitioners. The plea that the directors of the specified person (M/s Rockland Hospitals Ltd.) hold an indirect share in the Petitioner company, i.e. through M/s Rockland Pvt. Ltd. and is thus qualified, in our view, is not sustainable in as much as we have held that the use of the word "means" signifies the intention of the legislature to make the definition "hard and fast". If the intention of the legislature had been to permit scope of the same to be enlarged to include having substantial interest indirectly through another entity, the legislature would have specified so as has been done in the case of Explanation (b)(A). 20. Beneficial owner of the share as referred to in Explanation (b)(A) refers to shares held in a company by a person either in his own name or in the name of other, persons. A corporate entity is a separate legal entity. Merely because a director of the specified person holds shares in a company which in turn holds shares in the Petitioner would not....