STAR TELEVISION ENTERTAINMENT LTD Vs. DIRECTOR OF INCOME TAX
LAWS(AR)-2010-1-1
AUTHORITY FOR ADVANCE RULINGS
Decided on January 21,2010

STAR Television Entertainment Ltd. and Ors. Appellant
VERSUS
Director of Income Tax (International Taxation) Respondents

JUDGEMENT

P.V. Reddi, J. (Chairman) - (1.) THESE six Applications are filed under Section 245Q(1) of the Income Tax Act, 1961 (hereafter referred to as the "I.T. Act"). Three Applications viz., Appn. Nos. 805, 807 and 809 of 2009 have been filed by three non -resident foreign Companies. They are: 1) Star Television Entertainment Limited (STEL), 2) Star Asian Movies Limited (SAML) and 3) Star Asia Region FZLLC (SAR). The first two companies (applicants in Application Nos. 805 and 807) are the companies incorporated under the laws of the British Virgin Islands (BVI). The third company was incorporated under the laws of U.A.E. The first company viz., STEL owns Star Plus T.V. channel. The second company viz., SAML owns Star Gold. The third company owns Star One and Star Utsav. These three companies which broadcast the said entertainment channels are within the same group. Hereafter, these three companies are referred to as "amalgamating companies". Star India Private Limited (SIPL) is a company incorporated in India engaged inter alia in the business of marketing of the channels in the course of which it derives subscription and advertisement revenues. This Indian company will be referred to hereafter as the "amalgamated company". Prior to making the application, STEL and SAML sold their non -Indian language channels viz., Star World and Star Chinese Movies respectively to Star International Movies Limited, a BVI company. 1.1 The applicants state that for commercial reasons, it has been decided to consolidate Indian language channels viz., Star Plus, Star Gold and Star One/Star Utsav into the Indian Company - SIPL and accordingly, it has been resolved that STEL, SAML and SAR together with its assets and liabilities should be amalgamated with and merged into SIPL, the Indian company. SIPL will in turn issue shares to the share holders of the amalgamating companies (applicants) in accordance with the share exchange ratio arrived at by a professional valuation report. It may be stated here that the shares in SIPL - amalgamated company, are held by two Mauritius based companies. The holding of those share holders of SIPL would stand reduced to 51.09% of the post -merger equity. The proposed merger, it is stated, would be effectuated through a scheme of amalgamation as per the provisions of Sections 391 and 394 of the Companies Act, 1956 and such a scheme of amalgamation has already been filed in the Bombay High Court and the same is pending approval by the High Court. 1.2. According to the Scheme (vide para 5), with effect from the appointed date i.e. 1.4.2009 the transferred companies shall stand amalgamated with the transferee company (SIPL) and all the properties, assets, outstandings, liabilities, duties and obligations concerning the transferor companies shall stand transferred to and vested in the transferee company. The transfer and vesting of the properties and assets of the transferor companies shall be subject to the existing charges and encumbrances, if any. Para 13 of the scheme deals with issuance of shares by the transferee company. In para 13.5, it is specifically mentioned that the shares of the transferor companies held by their equity share holders shall without any further application, act or instrument, be deemed to have been automatically cancelled without any requirement to surrender the share certificates. According to para 13.7, the new shares in the transferee company to be issued to the members of the transferor companies shall be subject to the Articles of Association of the transferee company and such shares shall rank pari passu with the existing equity shares in the transferee -company.
(2.) THE question which has been formulated in Application Nos. 805, 807 and 809 for seeking advance ruling of this Authority is Whether the amalgamation, as defined under Section 2(1B) of the I.T. Act, 1961, of STEL, SAML and SAR with Star India Private Limited, an Indian company, will result in any liability under the I.T. Act in the hands of the applicants and their share holders? Application Nos. 806, 808 and 810 are filed by three companies based in British Virgin Island and Bermuda. The applicant in Appn. No. 806 is the sole share holder of STEL, the applicant in Appn. No. 808 is the sole share holder of SAML and the applicant in Appn. No. 810 is the sole share holder of SAR. A similar question has been framed in these three Applications as well for the purpose of seeking advance ruling. The question is: Whether the amalgamation, as defined under Section 2(1B) of the I.T. Act, 1961 of STEL, SAML and SAR with Star India Private Limited, an Indian company, will result in any liability under the I.T. Act in the hands of the applicants.
(3.) IT is the case of the applicants that no taxable income arises on account of the merger and that the tax under the head 'capital gains' is not attracted by reason of the specific exemption provided for by Section 47 (vi) read with Section 2(1B) of the I.T. Act. As regards the share holders' application, Section 47 (vii) is also invoked by the applicants.;


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