The Business Profits Act, 1947.
8. Interconnected companies.-
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Where any interest, annuity, or
other annual payment, or any royalty or rent, is payable by one company to
another company, and one of those companies is a subsidiary of the other, or
both are subsidiaries of a third company, and the recipient company is resident
outside British India, no allowance shall be made in respect of such payment in
computing the profits or losses of the paying company.
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Where-
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a company (hereinafter referred to as "the principal") is
resident in British
India and is not a subsidiary of any other company
resident in British
India; and
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during the whole or any part of any chargeable accounting period of the
principal, another company resident or carrying on
business within British
India (hereinafter
referred to as "the subsidiary") is a subsidiary of the principal,
the capital or profits or losses of the subsidiary for such chargeable
accounting period or part thereof shall be treated for the purposes of this Act
as if they were the capital of, or as the case may be, profits or losses arising
from the business of, the principal:
Provided that the profits of the subsidiary so treated shall not be exempted
from business profits tax in the hands of the principal by reason of any
exemption applicable to the principal under the proviso to section 4.
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Where
the chargeable accounting periods of the principal and subsidiary are not
co-terminus, such division and apportionment of the profits or losses of the
subsidiary for any chargeable accounting period shall be made as will allocate
the due proportion thereof to the relative chargeable accounting period or
periods of the principal;
and such division and apportionment shall be by reference to the proportion
that the number of days of the chargeable accounting period of the subsidiary
falling within the relative chargeable accounting period or periods of the
principal bears to the total number of days in the chargeable accounting period
of the subsidiary.
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For the purposes of this section a company shall be deemed to be a
subsidiary of another company if and so long as not less
than four-fifths of its ordinary share capital is beneficially owned by that
other company, whether directly or through another company or other companies,
or partly directly and partly through another company or other companies.
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The business profits tax payable by
virtue of this section by the principal shall, for the purposes of section 10 be
allocated by the income-tax Officer to the respective companies concerned in
such proportion as in his opinion is just.
Provided that the principal shall have the same rights of appeal against an
order of allocation made under this sub-section as it
has under this Act against the amount of its business profits tax assessment.
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