FIRESTONE INDUSTRIAL PRODUCTS INC,UNITED STATES vs. ACIT, CIRCLE 1(3)(1), NEW DELHI

ITA 1066/DEL/2023Status: DisposedITAT Delhi05 June 2024AY 2018-19Bench: the Ld. CIT(A), assessee had taken a plea that the company is a separate entity from its share holders/members and, with transfer of shares, assets of the company are not transferred, and the same continues to be held by the company. It was also explained that since the assessee did not have PAN at the time of sale of shares, buyer M/s Sundaram Industries Pvt. Ltd. deducted @20% plus surcharge and cess on such Long Term Capital Gain earned by the assessee, which is reflected in From 26AS an11 pages
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What did the Tribunal hold?

The Tribunal held that the transfer of shares, even if it results in a change of control, cannot be dissected into a transfer of underlying assets of the company. The company and its shareholders are distinct legal entities, and the sale of shares is a transfer of a capital asset in itself.

What were the facts?

The assessee, a US-based foreign company, sold its unlisted equity shares in an Indian subsidiary, declaring long-term capital gains. The Assessing Officer (AO) treated the transaction as a sale of the entire business, including assets and goodwill, thus taxing the gains at a higher rate. The CIT(A) upheld the AO's decision.

What were the issues?

Whether the sale of shares in a subsidiary constitutes a sale of the business and its assets, thereby attracting a higher capital gains tax rate, or if it is a simple transfer of shares taxable at a lower rate.

Which sections of the Income-tax Act were involved?

Section 112(1)(c)(ii), Section 112(1)(c)(iii)

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Income Tax Appellate Tribunal, DELHI BENCHES : D : NEW DELHI

Before: SHRI G.S. PANNU, HON’BLE & SHRI ANUBHAV SHARMA

For Appellant: Shri Ved Jain, Adv. & Ms. Supriya
For Respondent: Shri Vizay B. Vasanta, CIT-DR
Hearing: 16.04.2024Pronounced: 05.06.2024

PER ANUBHAV SHARMA, JM: This appeal is preferred by the assessee against the order of the Ld. CIT(A), Delhi-42, New Delhi dated 13.02.2023 relating to assessment year 2018-19. 2. The facts in brief are that the Assessee is a Foreign Company and admittedly tax resident of United States of America and does not carry out any business activity in India. During the year under consideration, assessee has filed a return of income declaring taxable income of Rs. 12,12,72,460/- and claimed a refund of Rs. 1,31,15,980/- on account of long term capital gain on sale of unlisted equity shares in India. Assessee had acquired 51% shares of Firestone T

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