COMMISSIONER OF INCOMETAX Vs. BRAHMI INVESTMENTS PVT LTD

JUDGEMENT

(1.) The Income Tax Appellate Tribunal, Ahmedabad Bench 'C', has raised the following two questions under Section 256(1) of the INCOME TAX ACT, 1961 (the Act) at the instance of the Commissioner of Income-tax :

(2.) The Assessment Year is 1988-89 and the relevant previous year is Financial Year ended on 31st March, 1988.

(3.) The assessee, a Private Limited Company, received assets valued at Rs.93,24,000/- from one Aravalli Investments Private Limited (Aravalli) on voluntary liquidation of Aravalli. The Assessing Officer invoked Section 46(2) of the Act for bringing to tax the surplus under the head 'Capital gains' after deducting the amount paid by the assessee for acquisition of shares i.e. Rs.55,36,680/-. In the process, the claim of the assessee that nothing was liable to be taxed by virtue of provisions of Section 47(v) of the Act was rejected. The assessee had raised an alternative contention, that for the purposes of computing the capital gains chargeable to tax the cost of previous owner in terms of Section 49(1)(iii)(e) of the Act should be considered, also came to be rejected. The alternative contention was based on the fact that the assessee-company was a wholly owned subsidiary of one Karamchand Premchand Pvt. Ltd. (KPPL). That originally KPPL had acquired all the 1,11,000 equity shares of Aravalli in July and August 1973 at a total cost of Rs.1,11,000/- which was both the face value and paid up value of the shares of Aravalli. As a consequence Aravalli had become wholly owned subsidiary of KPPL. In December, 1973 all the 1,11,000 shares of Aravalli were transferred to the assessee by KPPL at a total consideration of Rs.55,36,680/-. As a consequence Aravalli became wholly owned subsidiary of the assessee-company. It was in this context that the plea of the assessee for benefit of Section 47(v) of the Act, and in the alternative, cost of acquisition to the previous owner under Section 49(1)(iii)(e) of the Act was based.