DCIT 4(1), MUMBAI V. CRESCENT FINSTOCK LTD, MUMBAI

ITA 1546/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79463 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Wholly owned subsidiary

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.1546/M/2012 (ASSESSMENT YEAR: 2008 - 2009 ) DCIT - 4(1), 6 TH FLOOR, R.NO.640, AAYAKAR BHAVAN, MUMBAI - 20. / VS. CRESCENT FINSTOCK LTD, KANTA TERRACE, 1 ST FLOOR, 533 KALBADEVI ROAD, MUMBAI - 02. ./ PAN : AAACC 6420 F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SUNIL KUMAR AGARWAL / RESPONDENT BY : SHRI DHARMESH SHAH / DATE OF HEARING : 10.7.2014 / DATE OF PRONOUNCEMENT : 18 .7.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 5.3.2012 IS AGAINST THE ORDER OF THE CIT (A) - 8, MUMBAI DATED 26.12.2011 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING THE ADDITION AMOUNTING TO RS.1,85,02,274/ - U/S 2(22)(E) ON ACCOUNT OF DEEMED DIVIDED . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE IMPUGNED ORDER OF TH E CIT (A) IS CONTRARY TO LAW TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. DURING THE PROCEEDINGS BEFORE US, AT THE OUTSET, BOTH THE PARTIES BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AS WELL AS THE ORDERS OF THE REVENUE AUTHORITIES AN D DEMONSTRATED THAT THE COMPANY IN QUESTION NOT A PRIVATE LIMITED COMPANY WHICH IS ALONE IS ATTRACTED TO THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE SAID COMPANY IS A PUBLIC COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED. CONSIDERING THE ABO VE DISTINCTION, THE CIT (A) GRANTED RELIEF TO THE ASSESSEE . IN THIS REGARD, THEY BROUGHT OUR ATTENTION TO PARA 4.8 OF THE IMPUGNED ORDER. 2 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES IN GENERAL AND ORDER OF THE CIT (A) IN PARTICULAR. ON PERUSAL OF THE SAID ORDER OF THE CIT (A), WE FIND THE SAID PARA 4.8 IS RELEVANT IN THIS REGARD AND THE SAME READS AS UNDER: 4.8. I HAVE CONSIDERED THE CONTENTION OF THE AO AS WELL AS THE LD AR. FROM THE ABOVE DISCUSSION, THE FOLLOW ING POINTS EMERGE. I. THE SUBSIDIARY COMPANY VIZ DOUBLEDOT FINANCE LIMITED IS NOT A PRIVATE LIMITED COMPANY BUT IS A COMPANY IN WHICH PUBLIC IS SUBSTANTIALLY INTEREST AS MORE THAN 51% (58.53%) OF THE EQUITY SHARE CAPITAL OF DOUBLEDOT FINANCE LIMITED HAS BEEN HELD UNCONDITIONALLY THROUGHOUT THE FINANCIAL YEAR BY CRESCENT FINSTOCK LIMITED (THE APPELLANT COMPANY). II. CRESCENT FINSTOCK LIMITED IS A COMPANY LISTED ON THE VADODARA STOCK EXCHANGE. III. VADODARA STOCK EXCHANGE IS A RECOG NIZED STOCK EXCHANGE (SEBI APPROVED) FOR THE PURPOSES OF THE INCOME TAX ACT. IV. THE CBDT CIRCULAR 372 OF 1983 CLEARLY STATED THAT A SUBSIDIARY OF A COMPANY WHICH IS A LISTED COMPANY OR A WHOLLY OWNED SUBSIDIARY OF SUCH SUBSIDIARY COMPANY REFERRED TO EARLIER A RE BOTH COMPANIES IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED. V. THIS VIEW IS ROE THAN AMPLY REINFORCED BY THE CASES CITED BY THE APPELLANT AND DISCUSSED EARLIER IN THE ORDER. VI. IT IS NOT ENVISAGED BY LAW THAT ONLY WHOLLY OWNED SUBSIDIARY OF A LISTED COM PANY SHALL BE COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED . VII. IF ONE WERE TO CAREFULLY CONSIDER THE TOTALITY OF THE PROVISION AS CONTAINED IN SECTION 2(18)(B), IT IS ABUNDANTLY CLEAR THAT THE STIPULATION OF WHOLLY OWNED SUBSIDIARY APPLIES ONLY TO THE HOLDING COMPANY AND NOT TO THE COMPANY IN WHICH THE SHARES ARE HELD . VIII. SECTION 2(18)(B) HAS ALSO MADE A FURTHER DISTINCTION BETWEEN SUBSIDIARY COMPANIES WHICH ARE IN THE NATURE OF MANUFACTURING COMPANIES AND NON - MANUFACTURING COMPANIES IN ORDER TO QU ALIFY AS A SUBSIDIARY IT IS SUFFICIENT THAT ONLY 40% OF THE SHARES BE HELD BY THE HOLDING COMPANY WHEREAS IN THE NON - MANUFACTURING SECTION IT HAS TO BE NOT LESS THAN 50% . 5. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE CIT (A) HAS RIGHTLY ADJUDI CATED THE ISSUE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRON OUNCED IN THE OPEN COURT ON 1 8 T H JULY, 2014. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 1 8 .7.2014 . . ./ OKK , SR. PS 3 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI