Law:

Section:

Section 56, read with sections 45 and 47, of the Income-tax Act, 1961, and article 13 of the DTAA between India and Singapore (Capital gains) - Income from other sources - Chargeable as - Applicant, a Singapore based company, holds 99.61 per cent share capital of 'O', an Indian company - It also holds 49.75 per cent of share capital in 'B' India - Balance 56.25 per cent shares in 'B' India is held by 'O' India - Applicant has transferred its 49.75 per cent shares held in 'B' India, to 'O' India without consideration - According to applicant since transfer was effected before coming into force of section 56(2)(viia) transaction was not taxable under Act in terms of section 45, read with section 48 because it was one without consideration - Revenue's case is that an oral gift has been made by one corporation to another corporation - According to revenue, purpose for making such a gift is for avoiding payment of tax and to get out of clutches of section 56(2)(viia) which came into effect on 1-6-2001 - Whether in view of revenue's submission, it is necessary for applicant to demonstrate before this authority that transfer was authorized by articles of association and it meets requirements of section 82 of Companies Act, 1956 - Held, yes [Matter remanded] FACTS Facts The applicant is a company incorporated in Singapore. It holds 99.61 per cent of the share capital in 'O' Ltd., an Indian company. The applicant also holds 49.75 per cent of the share capital in 'B' India. The balance 56.25 per cent shares in 'B' India is held by 'O' India. According to the applicant, it has transferred its 49.75 per cent shares held in 'B' India, to 'O' India without consideration. The transaction is evidenced by a memorandum of gift. Since the transfer was effected before the coming into force of section 56(2)(viia), the transaction was not taxable under the Act in terms of section 45, read with section 48 because it was one without consideration. The transaction which was a gift, was also exempted from the operation of section 45 by virtue of section 47(iii). This Authority allowed the application under section 245R(2) of the Act for giving rulings on the different question. Issues…

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