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By K. P. Shah & Pamil H. Shah
Chartered Accountants
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH ‘A’ (SPECIAL BENCH)
(Before S/Shri R.P.Garg –VP, Shri B.M.Kothari –AM
and Shri T.K.Sharma - JM)
ITA No. 1299/Ahd/1996
A.Y. 1991-92
The ACIT Central Vs.
M/s.Ajax Investment Ltd,
Circle-1(1)
Ahmedabad
Ahmedabad
(Respondent)
(Appellant)
ITA No. 2064/Ahd/1996
A.Y. 1991-92
The ACIT Central Circle Vs M/s.Acropolish Investment
Ltd,
(Appellant)
(Respondent)
Appellant By : Shri J.P. Shah
Respondent by : Smt Vibha. Desai
O R D E R
PER GARG, Vice President
ISSUE
“Whether second subsidiary company of first
subsidiary company (Parent company listed in the recognized
stock exchange of India) falls within the definition of a ‘company’
in which public are substantially interested as per section 2(18)(b)(B)(C)
of the I.T.Act, 1961 notwithstanding the fact that neither parent
company is holding any shares (or requisite shares) in the second
subsidiary company nor is the first subsidiary company holding 100%
shares in the second subsidiary company?“
FACTS
Both the assessees have claimed the status of a
"widely held company" u/s 2(18) of the Act. Both the assessees’
equity share holding is of 100 shares each 50 shares each were held by
Samudaya Investment Ltd (hereinafter referred to as "Samudaya")
in the 1st case of Ajax Investment Ltd and by Adavat Investment Ltd
(hereinafter referred to as "Adavat") in the case of
Acropolish Investment Ltd throughout the previous year. Not less
than 50% of equity shares of these two companies are held respectively
by Sifa Trading Co.(hereinafter referred to as "SIFA") and
Akash Agencies (hereinafter referred to as "Akash") throughout
the previous year. Whole of the shares of Samudaya and Adavat are held
by SIFA and Akash. Both SIFA and Akash are listed on Bombay Stock
Exchange on the last day of the previous year ended on 31/03/1991. The
AO observed that Samudaya and Adavat which are holding 50% of equity
shares of the assessees are nbot companies listed in the Stock exchange.
According to him, the assessees’ whole of share capital is not held by
parent company i.e. Samudaya and Adavat and therefore they can not be
treated as ‘Widely held companies’. The CIT(Appeals) allowed the
claim of the assessee. When the matter came to the division bench of
tribunal, it noticed that the tribunal has accepted the claim of the
assesses in the case of Alligator Investment Ltd for A.Y.1986-87 to
1989-90. The divisional Bench, however did not find the favour
with the reasoning in the said order and had observed that Samudaya
qualifies to be a company in which public are substantially interested
within the meaning of the section 2(18)(b)(B)(C). Ajax is a subsidiary
of Samudaya. Sifa does not have any shares in Ajax. A subsidiary company
of Samudaya would qualify to fall in the category of company in which
public are substantially interested provided the whole of the share
capital of the subsidiary company were held by the parent company or by
its nominees throughout the previous year. The Divisional Bench
therefore, raised a serious doubt about the correctness of the said
decision of the Tribunal and recommended for a constitution of Special
Bench and that is how the matter came to special bench.
HELD
The assessee companies are public limited companies,
therefore, they satisfied the first xcondition of section 2(18)(b)
namely, they are not private limited companies under the Companies
Act. The question is whether Samudaya and Adavat are any of the entity
mentioned in clause (a), (b) or (c) mentioned in item (B) of Section
2(18). These are companies falling in the category of “Any
company to which this clause applies” not less than 50% of their
shares are held by SIFCO and Akash which are public limited companies
and their shares are listed in the Bombay Stock Exchange on the last day
of the previous year as required by Item ‘A’ because in other words,
these are companies as specified in clause (b) of section 2(18) of the
Act. As assessees’ shares carrying not less than 50% voting powers are
unconditionally allotted to or unconditionally acquired by Samudaya and
Adavat and they held these shares beneficially throughout the previous
year, the assessee companies are to be held as the companies in which
public is substantially interested under section 2(18) (b) of the Act.
The hon’ble tribunal held that there is no requirement in section
2(18)(b) to the effect that either the parent company (SIFCO or AKASH)
should hold any shares or requisite shares in the 2nd subsidiary
(assessee) or that the 1st subsidiary company (Samudaya or Adavat)
should hold 100% shares of the assessee. In the opinion of the tribunal,
Samudaya and Adavat are companies to which clause (b) applies and since
they held requisite number of shares in the assessee companies, it would
meet with the requirement of being companies in which public is
substantially interested. In the result, revenues’ appeals are
dismissed.
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH ‘A’
(Before S/Shri B.M.Kothari and Shri S.K.Yadav)
ITA No. 448/Ahd/1993
A.Y. 1986-87
M/s.Rambhai Kilabhai & Co. Vs.
The ACIT Inv.Cir 3(1),
Dholka
Ahmedabad
(Appellant)
(Respondent)
Appellant By : Shri Manish J. Shah
Respondent by : Shri P.N.Tatoo, DR
O R D E R
PER B.M.Kothari, (Accountant Member) :
ISSUE
Whether addition of Rs.45,000/- made by the AO as
“interest not charged on advance given to M/s. Krishna Traders for non
business purposes” is justified.
FACTS
In a letter sent by a M/s. Kirshna Traders dated
26-12-1985 to the appellant, it was mentioned that they have received a
loan of Rs.2,50,000/- by cheque dated 26-09-1984 from the assessee.
However, on account of bad condition of the market on account of
disturbance in the city, they are facing the crisis. The assessee
keeping in view the bad financial position of the debtor and in order to
ensure recovery of the principal amount agreed not to charge any
interest for S.y.2040 and 2041. It is not a case where interest
expenditure has been disallowed but addition has been made in respect of
hypothetical interest income, which never accrued to the assessee
nor was received by the assessee.
HELD
The decision of not charging any interest for the
year under consideration was based on commercial consideration. No tax
can be levied on income which has not been materialized. Relying on the
judgement of the Apex court in 236 ITR 315, the addition is deserves to
be deleted. Accordingly, the Hon’ble tribunal directed the AO to
delete the addition.
February 2003
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