Section 115BAB - Lower Tax rate

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Mikdad Merchant (Querist)
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17 January 2020 Facts:-
A manufacturing company in the field for manufacturing furniture, is planning to set up a completely new manufacturing plant by purchasing new machinery etc with a new location etc and wants to form a wholly owned subsidiary for the new palnt, the new plant will also manufacture furniture of a different quality and style.

Query:-
Assuming all other conditions of Section 115BAB are met, will the fact that the new compnay is a wholly owned subsidiary and that the business of the new company is similar to that of the parent, restrict the consessional rate under the pretext of “being set up by spliting up or reconstruction.”?

Also if you could guide me to case laws and reasoning for your view it would be great.

Zeal Bangdiwala

Zeal Bangdiwala (Expert)
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27 January 2020 I assume non of the division of the existing company is being split or reconstructed into the new company and also non of the existing Plant and machinery is being used by new company. In this case if a wholly owned subsidiary is set up afresh with new plant and machinery then there shall no restriction of the concessional rate u/s 115BAB as all the conditions are being fulfilled and assuming no part or division of the holding company is being transferred to the new subsidiary company.

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