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 reduction in shares of ANNPL did not result in transfer of capital asset as envisaged u/s. 2(47). The AO came to this conclusion, in light of the finding that, even though the number of shares had reduced, the face value of Rs. 10 as well as the percentage of assessee’s share at 99.89% remained at the same level as it was before the reduction of share capital. He didn’t agree with the assessee that there was real transfer of asset, as the scheme resulted in extinguishment/relinquishment of part of the assessee’s rights in the shares of ANNPL and therefore, the transaction fell within the purview of section 2(47). The AO held that the decision of the Supreme court in the case of Kartikeya V. Sarabhai vs. CIT (228 ITR 163) relied on by the assessee cannot be applied as the facts of the case are contrary to the case as there was no reduction in the face value of the shares in the case of the assessee. On appeal, the CIT(A) agreed with the AO and upheld her order.
HELD