2023 (5) TMI 1036
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....fresh adjudication. 04. In MA no.114/Mum/2021, is in ITA No 7299/ Mum/2017, the co-ordinate bench held that assessee has raised an additional ground no.6 that remains to be adjudicated. Accordingly, the co-ordinate Bench recalled the order for adjudicating the additional ground no.6. 05. Thus, In ITA No. 136/Mum/2017, only issue is to adjudicate ground no.36 of the appeal of learned Dy. Commissioner of Income Tax, large taxpayer unit-2, Mumbai in which is as under:- "On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in excluding the comparable M/s Axis Integrated Systems Limited without appreciating the fact that Business Support Services and Management Services are highly skill-based services and by no stretch of imagination BSS and MSS can be treated as low-end services." 06. At the time of hearing both the parties were heard and both the parties pointed out that this comparable was considered by the co-ordinate Bench in earlier years in ITA No.1547/Mum/2016 for A.Y. 2010-11, ITA No.2733/Mum/2017 for A.Y. 2011-12 and ITA No.5842/Mum/2017 for A.Y. 2012-13 vide order dated 28th September, 2018, wherein at paragraph no.163, the above comparable compa....
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....aimed in the Return of Income on erroneous understanding that the said transaction was not a 'transfer' under section 47(iv) of the Income Tax Act 1961 (Act), though relevant conditions specified in section 47(iv) were not fulfilled. The appellant submits that the loss on sale of said shares was allowable under section 45 of the Act as the whole of share capital of its subsidiary company M/s. RIIHL was not held by the appellant and hence the sale of equity and preference shares was not covered by the exception under section 47(iv) of the Act. Your Appellant reserves the right to add, amend, alter or vary all or any of the above grounds of appeal as they or their representatives may think fit." 011. According to ground no.6, the assessee claims and submits that i. Assessee has incurred long term capital loss arising on sale of equity and preference shares of M/s. Reliance Exploration and Production DMCC (REP DMCC), to its subsidiary company M/s. Reliance Industrial Investments and Holdings Ltd ('RIIHL), Which was claimed as exempt u/s 47 (iv) of the Act. ii. It was erroneous understanding that the above said transactions is falling within the exception to defin....
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....32 31/3/ 2009 52,816 73,41,06,372 13,899.32 31/3/2010 5,45,000 658,46,95,319 12,082.01 31/3/2011 3,62,000 439,65,58,448 12,145.19 25/9/2011 4,20,000 557,90,89,332 13,283.55 Total 24,82,316 3,120,79,66,139 vii. Thus, as on 31st March, 2012, assessee was holding a. 24,82,316 5% noncumulative compulsorily convertible preference shares at a total cost of Rs. 31,207,966,139/-, and b. 176,200 equity shares at total cost of Rs.210,84,30,198/- viii. Reliance exploration and production DMCC purchased and cancelled 11,02,500 5% noncumulative compulsorily convertible preference shares of AED 1000/- each at par aggregating US$ 30 crores (AED 110,25,00,000) as per board resolution and shareholder resolution dated 17 July 2012. ix. Thus, assessee was left with 13,79,816 5% noncumulative compulsorily convertible preference shares as well as 1,76,200 equity shares of the above company. 013. On 28/3/2013 assessee sold all these preference and equity shares to Reliance Industrial Investments And Holdings Ltd. 13,79,816 preference shares were sold for 1,376,94,45,097/- and 1,76,200 equity shares were sold for 167,35,54,903/....
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....iance Industry Ltd along with its six nominees was holding 14,75,04,400 equity shares of Reliance industrial investments and Holdings Ltd. Thus, Reliance Industries Ltd. held 100% equity of this company i.e. Reliance Industrial Investment and Holdings Ltd. ii. It has issued two different types of preference shares. iii. As on 31st of March 2012, it had issued 14,57,250 9% noncumulative optional convertible preference shares. These were held by following entities as under:- Preference Share Holding Pattern Of 9% Noncumulative Optionally Convertible Preference Shares serial number Name of the shareholder Number of shares held as at 31/3/2012 As at 31 three 2013 1 Reliance Petro investments Ltd 9,00,500 9,00,500 2 Reliance KG exploration and production is private limited 51,750 Nil 3 Reliance retail finance limited 5,05,000 5,05 ,000 Total 14,57,250 14,05,500 iv. has also issued 10% noncumulative optionally convertible preference shares of Rs. 10/- each which were as under:- Serial number Name of preference shareholder Number of preference shares held as As at 31/3/2013 1 Reliance Petro investments Ltd &nbs....
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.... of the subsidiary company, then, transfer of such capital asset shall not be chargeable to tax under the head capital gain in terms of provisions of section 45 of The Income Tax Act. 020. Undisputedly, in case before us there is a transfer of a capital asset by assessee to its subsidiary company, which is also an Indian company. Thus, there is no dispute that Reliance industrial investments holding company Ltd is a subsidiary company of reliance industries Ltd. The only dispute is that Reliance Industries Ltd, Assessee does not hold the whole of the share capital of Reliance Industrial Investments Holding Limited. Assessee holds only 100% of the equity share capital of its subsidiary. However, it does not hold any of the preference share capital of its subsidiary company. 021. Apparently Reliance Industries Ltd, does not hold any of the 2 types of preference shares issued by Reliance industrial investments and Holdings Ltd i.e. (1) 9% non-cumulative optional convertible preference shares of Rs. 10 each and (2) 10% noncumulative optionally convertible preference shares of Rs. 10 each. 022. Assessee submitted shareholding pattern of the subsidiary company as on 31/3/2012 and 31/3....
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....tible preference shares of Rs.10 each fully paid up which are redeemable at the end of 7 years from the date of allotment at a price of Rs.2,000/- per share. It was submitted that 96.55% of the shares as on 31st march, two different companies namely Reliance Retail Finance Ltd and Reliance Petro Investments Ltd. hold those shares. Further, Reliance Industrial Investment and holdings Ltd has issued 1,49,020/-, 10% non-cumulative convertible preference shares of Rs.10 each fully paid up which are held by Reliance polyolefin Limited. It has also issued 1200, 10% non-cumulative optional convertible preference shares of Rs.10 each fully paid up were also held by Reliance Petro Investments Ltd. Thus, though Reliance Industries Ltd. Assessee holds 100% equity share capital of Reliance Industrial Investment and Holdings Ltd but it does not hold preference share capital of the Reliance Industrial Investment and Holdings Ltd. Thus, it does not hold the "whole of the share capital" of the subsidiary company. Accordingly, conditions prescribed under Section 47(iv) (a) of the Act is not satisfied. Therefore, Provisions of Section 45 are triggered and, any profit or gain arising on the sale of t....
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....ce share capital. The explanation (i) and (ii) to that section defines what is equity share capital and what is preference share capital. The companies (share capital and debentures) Rules ,2014 provides for conditions for issue of certain shares. Thus, it is apparent that the equity share capital could be with voting rights or with differential rights as to dividend, voting or otherwise as provided under rule 4 of the rules. Similarly, preferential share capital carries a preferential right with respect to payment of dividend and for prepayment of capital at the time of winding up. Thus, assessee company is not holding even a single preference shares of (1) 9% noncumulative optionally convertible preference shares of Rs. 10 each fully paid up, and (2) 10% noncumulative optionally convertible preference shares of Rs. 10 each fully paid up, but it holds 100 % equity shares of Rs. 10 each fully paid up. In these circumstances, only question is that can an assessee company be said to be holding the 'whole of share capital' of the subsidiary company to which capital assets are transferred. 033. According to us, the 'share capital' includes equity as well as preference ....