ADMINISTRATIVE ORDER

F.No.500/0091/2010-FT&TR-III

Vacancy of two posts of Under Secretary in EOI Cell, FT&TR-Division, CBDT

CASE LAW

2017-TII-07-HC-MUM-INTL

CIT Vs ZYDUS NYCOMED HEALTHCARE PVT LTD: BOMBAY HIGH COURT (Dated: February 24, 2017)

Income Tax - Section 10B(9)

Keywords: beneficial interest - change of shareholding - error apparent - share transfer - financial interest & interim dividend

The assessee is a joint venture company of two entities. Subsequently, the name of foreign company was changed to Altana AG. Assessee claimed exemption u/s 10B. During the course of audit, AO noted that in FY relevant to AY 2003-04, there was a change in the shareholding of company, where the beneficial interest of foreign company was transferred to another company. Hence, sub-section (9) of section 10B, prior to its amendment came into operation and the benefit of sub-section (1) of section 10B could not have been availed of. On appeal, CIT(A) upheld the AO's order and opined that assessee was not eligible for exemption, as the purported transfer of 1.5% shares to Altana AG was full of discrepancies and a deliberate attempt was made escape the rigors of sub-section (9) of section 10B.

On appeal, the High Court held that,

Whether in case, a pure finding of fact has been recorded, which cannot be termed as vitiated by an error apparent on the face of record, an appeal raised before the Court could raise any substantial question of law - NO: HC

+ we are unable to agree for the simple reason that the entire records were placed before the tribunal. As a last fact finding authority, it examined them and held that the share pattern at the end of each financial year, reveals that the non-resident share holder in assessee company was the German company. That German company changed its name to Altana Pharma AG. After the change in name of that company, it decided to transfer the share holding to its 100% subsidiary. The financial interest, however, was retained by said Altana Pharma AG through its 100% subsidiary. That is why, after the transfer of the share holding to its subsidiary by M/s. Altana Pharma AG, it was advised that if this transaction is interpreted to mean that there was a change of more than 51% of the share holding in the assessee company, then, on account of that transfer, the assessee may come in difficulty and the benefit of section 10B would not be available to the assessee. That is why to maintain the ratio, a request for splitting up the share certificate was granted. Tribunal perused the contents of remand report and held that share has been transferred before March, 2003, interim dividend has been received by the transferree. If AO verified these documents, accepted them by observing that they are in order, then, the tribunal concluded that there was no reason to hold that any change of ownership occurred. Hence, on facts, it concluded that there is no change in ownership to the detriment of the assessee company. That is how sub-section (9) of section 10B on facts was not attracted. Once we come to this conclusion and a pure finding of fact, which cannot be termed as perverse or vitiated by an error apparent on the face of the record is recorded, then, the appeal does not raise any substantial question of law. Once this was the question and essentially projected, then, we need not admit the appeal. As far as the question at para 6.1 is concerned, that is on the construction of section 10B and we do not think that the said question arises in the backdrop of the tribunal's order impugned in this appeal and in the facts and circumstances peculiar to the assessee's case. We, therefore, leave that question open for a decision in an appropriate case. Hence, the appeal fails. It is dismissed.

Revenue's appeal dismissed