In Brief
Annamalaiar Mills, a holding company, was party to a shareholding reorganisation in 1985 where shareholder Group A retained the holding company and Group B received the subsidiary. The subsidiary paid Rs. 42.45 lakhs to the holding company. The tax authority treated this as capital gains; the Supreme Court disagreed. Since no payment reached the shareholders receiving transferred shares—only the holding company received funds—capital gains tax did not apply. The Court also held the transaction could not be taxed both under the Gift Tax Act and Income Tax Act simultaneously, dismissing the appeal.
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