Glimpses of Supreme Court Rulings

19. PCIT vs. Jupiter Capital Pvt. Ltd.

(2025) 170 taxmann.com 305 (SC)

Capital gains – Reduction of share capital - The reduction in share capital of the subsidiary company and subsequent proportionate reduction in the shareholding of the Assessee would be squarely covered within the ambit of the expression "sale, exchange or relinquishment of the asset" used in Section 2(47) the Income-tax Act, 1961 – Percentage of shareholding of the assessee in the Company prior to, and post, reduction in Share Capital is not relevant - Loss incurred on erosion of the net worth is allowable as capital loss.

The Respondent-Assessee was a company engaged in the business of investing in shares, leasing, financing and money lending. The Assessee had made an investment in Asianet News Network Pvt. Ltd. (ANNPL), an Indian company engaged in the business of telecasting news, by purchasing 14,95,44,130 shares having face value of ₹10/- each. Thereafter, the Assessee purchased 38,06,758 shares from other parties, thereby increasing its shareholding to 15,33,40,900 shares which constituted 99.88% of the total number of shares of the company, i.e., 15,35,05,750.

The said company incurred losses, as a result of which the net worth of the company got eroded. Subsequentl