ACER COMPUTER INTERNATIONAL LTD Vs. STATE

JUDGEMENT

(1.) 1. The applicant is a non-resident company having its registered office Acer Computer International (ACI) , Business Park, # 01-01 Acer Building, Tower-A, Singapore-609923. It owns a subsidiary company M/s Acer India Ltd. (Acer India) having its registered office at Bangalore and factory in the Union territory of Pondicherry. The applicant itself is a wholly-owned subsidiary of Acer Inc. which is a foreign company listed in Taiwan Stock Exchange. Acer Inc. has another fully owned subsidiary called M/s Acer Holdings International (AHI), a foreign company having its registered office in British Virgin Islands. The applicant says that it is being proposed to transfer the shares held by ACI in Acer India to AHI and even after the proposed transfer the Acer Inc. would continue to be the beneficial owner of the shares in Acer India and it would be a change from one wholly-owned subsidiary to another wholly owned subsidiary. Presently, Acer India Ltd. has carried forward losses of Rs. 54,90,793. On these facts, the applicant seeks advance ruling from this Authority on the following question :

(2.) In the comments of the jurisdictional CIT, it is stated that the legal ownership of the shares in Acer India vests with the ACI and not Acer Inc., therefore, it can never be a beneficial owner of Acer India. If there is a change of the shareholdings from ACI to AHI, Acer India would lose the benefit of carry forward of losses in view of the provisions of Section 79 of the IT Act. It added that the present case does' not fall in any of the exceptions wherein lifting of corporate veil is permissible, therefore, it cannot be said that since ACI is 100 per cent subsidiary of Acer Inc. all assets of ACI would beneficially belong to Acer Inc. If such a plea is allowed the whole concept of corporate entity of having independent legal status with its seal would go haywire.

(3.) IT is necessary to take note of the development brought to our notice by the jurisdictional CIT in his letter No. Appln. Under Section 245Q/CIT(IT)/04-05, dt. the 12th April, 2004, which reads thus :