January 2019

Section 2(47) – Reduction of share capital, even where there is no change in the face value of the share or the shareholding pattern, results in extinguishment of right in the shares amounting to transfer of shares.

Jagdish D. Shah / Jagdish T. Punjabi
Chartered Accountants

8.  Jupiter Capital Pvt. Ltd. vs. Assistant Commissioner of Income Tax (Bangalore) Members:  Sunil Kumar Yadav (J. M.) and Arun Kumar Garodia (A. M.) ITA No.:445/Bang/2018 A.Y.: 2014-15. Dated: 29th November, 2018 Counsel for Assessee / Revenue:  S. Parthasarathi / D. Sudhakara Rao

 

Section 2(47) – Reduction of share capital, even where there is no change in the face value of the share or the shareholding pattern,  results in extinguishment of right in the shares amounting to transfer of shares.

 

FACTS

The assessee had invested in 15,33,40,900 equity shares at face value of Rs. 10 on different dates in its subsidiary company, Asianet News Network Private Limited (‘ANNPL’). The total number of shares of ANNPL was 15,35,05,750 out of which the assessee's share was 99.89%. As a result of the Order of High Court of Bombay, there was a reduction in share capital of ANNPL to 10,000 nos., and consequently the share of the assessee was reduced proportionately to 9,988 nos. The Court also ordered for payment of Rs. 3.18 crore as a consideration for reduction in share capital. The face value of the shares remained the same at Rs. 10 after the reduction. 

 

The assessee claimed Rs. 164.49 crore as Long Term Capital loss. According to the assesse, this loss had accrued on account of reduction in share capital of ANNPL. According to the AO, the r

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