In the landmark case CIT v. Sunaero Limited (2012) and

Solution

In CIT v. Sunaero Limited and related case law, courts have held that a "wholly-owned subsidiary" under the Companies Act requires 100% ownership by the holding company. If any shares are held by individuals (even as nominees or at the direction of the parent), those shares must be proven to be held beneficially for the parent company; otherwise, the subsidiary loses wholly-owned status. This principle is critical for tax benefits and regulatory treatment under the Act. The judgment clarified that formal shareholding structure is what matters for legal classification, not mere operational control. Courts will not accept arguments that nominee holders are merely holding shares on behalf of the parent without explicit legal evidence.