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2008 Supreme(Mad) 3516
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE K. RAVIRAJA PANDIAN & THE HONOURABLE MR. JUSTICE P.P.S. JANARTHANA RAJA
M/s. Areva T & D India Limited & Another
Versus
The Assistant Commissioner of Income Tax, Company Circle-I(1) & Others
W.P. Nos.1524 of 2007 & 11506 of 2007 and M.P.Nos.1 of 2007 and 2 of 2007
Decided on : 24-09-2008
For the Petitioners:Joseph Prabhakar, Shatiq Mohamed, A. Sathyaseelan, Advocates.
For the Respondents:R1, Mrs. Pushya Sitaraman, Senior Counsel for Income-tax Department, R2 & R4, P. Wilson, Assistant Solicitor General, R3, A. Palaniappan, Advocate.
The main legal point established in the judgment is that the subsequent amendment to Section 54EC rendered the challenge to the impugned notifications infructuous.
Headnote:
Section 54EC - Challenge to Notification - [INCOME TAX] - [Section 54EC of the Income Tax Act, 1961] - The court discussed the provisions of Section 54EC of the Income Tax Act, 1961 and the notifications issued by the Central Government restricting the investment in bonds to a sum of Rs.50 lakhs per person. The court analyzed the amendments to Section 54EC and the implications of the notifications, ultimately finding the challenge to the impugned notifications as infructuous.
Fact of the Case:
The petitioners challenged the conditions incorporated in the notification No.380/2006 F.No.142/09/2006-TPL dated 212. 2006, which restricted the investment in bonds to a sum of Rs.50 lakhs per person under Section 54EC of the Income Tax Act, 1961.
Finding of the Court:
The court found that the challenge to the impugned notifications had become infructuous due to subsequent amendments to Section 54EC, which incorporated the power to limit the amount of investment in bonds. The court dismissed the writ petitions and the connected miscellaneous petitions.
Issues: The issues involved were the validity of the conditions incorporated in the impugned notification and the violation of Articles 14 and 265 of the Constitution of India.
Ratio Decidendi: The court held that the subsequent amendment to Section 54EC made the challenge to the impugned notifications infructuous, and therefore dismissed the writ petitions.
Final Decision: The court dismissed the writ petitions and the connected miscellaneous petitions.
P.P.S. Janarthana Raja, J.
Writ petitions are filed by the petitioners seeking the relief of issuance of writ of Declaration declaring that the conditions occurring in the notification No.380/2006 F.No.142/09/2006-TPL dated 212. 2006 along with the words "subject to the following conditions, namely," issued by the Central Board of Direct Taxes are ultra vires Section 54EC of the Income Tax Act, 1961 and arbitrary and violative of Articles 14 and 265 of the constitution of India and consequently unenforceable.
2. Since the issue involved in both the writ petitions are one and the same, they are taken up together and disposed of by a common judgment.
3. The brief facts are as follows:
W.P.No.1524 of 2007:-
The petitioner is a company incorporated under the Companies Act, 1956, engaged in the business of Transmission and Distribution including manufacturing relays, circuit breakers, power transformers, distribution transformers and switch gear (Transmission & Distribution business (T & D business). Earlier the petitioner company was also engaged in non T & D business comprising manufacture of industrial motors, pumps, fans and energy meters for a number of years. The name of the petitioner company until 22.09.2005 was Alstom Limited. Areva Group of companies acquired the T & D business of Alstom group of companies world wide in January 2004. Areva T & D SA, France acquired in August 2005, the entire 66.35% shareholding in the petitioner company which was earlier held by Alstom Holdings S.A. As per SEBI regulations, Areva T & D SA, France acquired further 1,19,445 shares and thus Areva T & D SA now holds 2,65,83,845 shares of the petitioner company. The ultimate parent company of the petitioner company, namely Areva T & D SA is owned by the Government of France to the extent of 88% of the shareholding. After the take over, since Areva desired to focus only on T & D business and since Alstom Group desirous of retaining its interest in the Non–T & D business, it was decided to reorganize and reconstruct the petitioner company by transferring the non T & D business to its subsidiary company named Alstom Industrial Products Limited (AIPL). The shareholding of the petitioner company in Alstom Industrial Products Limited was to be ultimately acquired by Alstom Group and thus the controlling interest of the subsidiary company would get transferred to Alstom Group. Therefore, the Board of Directors of the petitioner company approved a scheme of arrangement under Sections 391 and 394 of the Companies Act for reconstruction of the petitioner company by transfer of its non T & D business as a going concern to its subsidiary for a consideration of Rs.41.3 crores. The said consideration for transfer was paid by issue of equity shares by the subsidiary to the petitioner company. The appointed date for this transfer was fixed as 1st January, 2006 and the scheme was also approved by the High Court of Calcutta and the order was received by the petitioner company on 11.08.2006. The effective date of transfer was 14.08.2006, when the petitioner company filed form 21 with Registrar of Companies, Kolkatta. The capital gains arising out of the sale transaction worked out to Rs.11,96,95,469/- being the difference between the sale consideration received for the transaction and the net worth of the undertaking sold as prescribed under Section 50B of the Income Tax Act. The relevant assessment year is 2006-2007 and the capital gain worked out to Rs.10,18,67,615/- after setting off the long term capital loss of the earlier years amounting to Rs.1,78,27,854/-.
W.P.No.11506 of 2007:-
4. The petitioner is engaged in the business of film production, distribution besides owing of studio and laboratory. The petitioner was a allottee/lessee and in possession of industrial Unit constructed on lease hold plot No.6 situated in Block FC of sector 126A, within New Okhla Industrial Development Area (Noida) District Gautam Nagar, Uttar Pradesh admeasuring
