SWC arm moves HC against tax demand

Primo Enterprises, a group company of Shaw Wallace Breweries, has filed a writ petition for a stay on the tax demand of around Rs 100 crore in the Bombay High Court.

According to official sources, the decision currently pending with the department, may set a precedence for treatment of income earned by companies through share transfer during mergers and acquisition. This is because the key issue in the matter is that while the department is treating the income as business income, the company has taxed it as capital gains. The demand was raised for the assessment year 2004-05.

The department is of the view that the amount was earned through transfer of shares for sale of the beer business of Shaw Wallace Breweries to SAB Miller-owned Mysore Breweries which was a strategic business decision.

The high court has adjourned the matter and has directed the company to deposit the amount in the court which has been attached in the form of NHB bonds, legal sources said. The company had invested the amount in NHB bonds to avail income tax exemption under section 54 (EC). In 2001-02, Shaw Wallace Breweries sold 12,34,122 share warrants of Re 1 to one of its group companies "" Primo Distributors.