382 October 20 To October 26, 2018 u Taxmann’s Corporate Professionals Today u Vol. 43 u^24
paper entry. On the other hand, the
petitioners were subjected to tax on
such fictitious asset. This may look
incongruous. However, gaining 99%
shareholding in AJL by YI provides
intrinsic value to the shares of YI. The
memorandum of association of YI which
provides for transfer of shares by the
members pulls the curtain down by
treating YI as any other commercial
entity. Obtaining shares at a throw
away price and becoming eligible for
the assets underlying those shares is
similar to lifting of corporate veil.Conclusion
- The facts of the case, the arguments of the
petitioners vis-a-vis the tax administration and
the decision of the Court show that the legal
provisions have some inbuilt ethical values.
The assessment under section 143(3) and
enquiry of the Assessing Officer if answered
fully and truly might have helped Mr. Rahul
Gandhi. The belief that shareholding in section
25 company does not require disclosure is
a superficial assumption for the reason that
the company YI was just a cloak and it had
all the semblance of a commercial entity.
The reassessment of Ms. Sonia Gandhi and
Mr. Oscar Fernandes was perfectly valid for
the reasons that there was no assessment
previously and, hence, it would not amount
to change of opinion. However, the Revenue
had exhibited its laxity by not pursuing the
reassessment proceeding against yet another
shareholder who did not fall in the same
jurisdiction. Also, the founder members
who transferred their shares subsequent to
assignment of debt of ` 90 crores by YI
have also not been proceeded with by the
Department.
The tax consequence was not only on the
petitioners who acquired the shares in YI
having huge intrinsic value after allotment
shares by AJL to YI but also the YI who
gained assets worth more than ` 400 crores
by virtue of having right to realize debt worth
` 90 crore. The tax effect was on both YI
(who gained on allotment of shares) and the
appeal proceedings were pending besides the
petitioners who subsequently acquired shares
in YI. The sequencing of transactions if carried
out properly, viz., by allotting shares in YI to
petitioners and thereafter getting shares from
AJL by YI would have limited the damage
with YI alone. For that matter, if nothing
was done, there would not have been any
tax consequence at all. All this showed that
the legal provisions when enacted genuinely
it acts effectively, regardless of who was at
the helm of affairs when it was inserted in
the statute book.
lllCuriOus Case OF ‘naTiOnal Herald’