TaxTMI 
TaxTMI 
2019 (7) TMI 1861
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.... July 12, 2006 1,89,000 162,540,000 4,665,996.84 3 June 4, 2007 1,974,353 169,794,358 5,040,651.86 4 March 27, 2009 2,674,420 230,000,120 6,479,789.27 2. The applicant was holding all 65,48,772 but one equity share of IEE Pvt. Ltd. The other one share was held by PMIT Pty. Ltd., a company from PSIT Group, as nominee shareholder for the benefit of the assessee in whom the beneficial ownership of the shares resided. The IEE Pvt. Ltd. is a wholly owned subsidiary of the applicant. The IEE Pvt. Ltd. is a private limited company engaged in the business of wholesale trading of electronic appliances/equipment in India. The shares of IEE Pvt. Ltd. are not listed on any recognized stock exchange in India. In September 2012 the applicant entered into a share purchase agreement with RAIL Ltd. ("the buyer") for sale of equity shares of IEE Pvt. Ltd. The buyer is a wholly owned subsidiary of APXL Sons and is engaged in the business of retailing consumer electronics and domestic appliance goods in India. As per the share purchase agreement 65,48,772 equity shares of IEE Pvt. Ltd. were sold to the buyer for a consideration of AUD 3,49,99,994.66. The cons....
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....e transfer of the assets and liabilities that give intrinsic value to the shares of the Indian company. Therefore, it is submitted that it is not a simple share transfer but transfer of all the assets and liabilities underlying the shares. It is strategic sale and not the sale of shares alone as per recitals 5.2(i) and 5.2(j) of the strategic alliance agreement dated September 2012. The recitals 5.2(i) and 5.2(j) are reproduced herewith- 5.2 The following activities shall occur on the closing date simul taneously- (i) The AS 400 agreement shall come into effect ; (j) The HK supply agreement shall come into effect ; As per recital 1.1 the above terms AS 400 agreement, HK supply agreement, wholesale company has been defined as following : "AS 400 agreement" means an agreement between PSIT Pty. Ltd. Australia and the wholesale company to be executed pursuant to which PSIT Pty. Ltd. Australia will provide to the wholesale, with effect from closing, use of AS 400 merchandising, inventory control, warehouse management, and accounting systems along with related support services upon terms and conditions specified therein. "HK supply ag....
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....se management techniques, access to foreign and local suppliers, manpower of the Indian subsidiary to the buyer and no separate value has been assigned to these assets or liability. Therefore, it can be stated that the transaction is a slump sale and therefore, section 50B of the Income-tax Act, 1961 is attracted and not section 112(1)(c)(iii) and tax rate has to be 40 per cent. and not 10 per cent. as claimed by the applicant. 10. It is argued that the applicant was controlling the affairs of the Indian subsidiary through its key managerial personnel (KMP), i. e., Mr. AS (A Fiji National), who was acting as the chairman and managing director of the Indian subsidiary, i. e., PW(I) Pvt. Ltd. and thus, it can be stated that the applicant was having branch and thereby have permanent establishment in India. 11. The Revenue has stated that since the sale consideration is not ascertainable, the provisions of section 50D are also applicable. Further, it is contended that the reference to the Valuation Officer should be made under section 55A of the Act to determine the fair market value of the capital asset. 12. In response to the Department's contentions, the applicant has m....
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....t has approved the merger of IEE Pvt. Ltd. with the buyer. (g) Further, the business assets, liabilities, etc. of IEE Pvt. Ltd. continued to be owned and run by IEE Pvt. Ltd. 3 Non-applicability of section 50D of the Act (a) The provisions of section 50D would be applicable only in case where the consideration accruing as a result of transfer of a capital asset is not ascertainable or cannot be determined. (b) In the present case, the applicant has received a consideration of AUD 34,999,994,66 (c) Given the consideration is ascertained and determined, the provisions of section 50D are not applicable. (d) Reliance is placed on the decision of the Bombay High Court in the case of Morarjee Textiles Ltd (ITA No. 738 of 2014) 4 Non-applicability of section 55A of the Act (a) The provisions of section 55A of the Act can only be triggered where the fair market value of the capital is required to be ascertained. (b) As mentioned in point 4 in the said table, the provisions of section 50D of the Act are not applicable, the provisions of section 55A cannot be triggered. The following judicial precedents support this proposition. CIT v. Smt. Nilofer I. Singh [....
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....t are appli cable as there is no clear basis of share price of 5.34 AUD. The provisions of section 55A are applicable as the market value of the capital assets is to be ascertained. (iv) The difference between fair market value of shares of subsidiary and the stated purchase price is income of the buyer under section 56(2)(viia). 14. From records it is seen that the applicant is operating in India through wholly owned subsidiary (IEE Pvt. Ltd.) and on account of the world wide operations of applicant group, it has established supply agreements and the developed warehouse management, inventory control software and accounting system and the same practices were employed in running operations in India. It is also noticed that as part of business strategy the applicant group entered into strategic alliance with APXL group in 2006 (much before the impugned sale in 2012), sharing part of its supply chain and other practices. Along with the application what was submitted was share purchase agreement and clause 5.4 of the said agreement mentions that all strategic arrangements would cease with effect from the closing date of share purchase agreement. The Department's content....