Allowing the appeal, the definition of transfer includes extinguishment of any rights in a capital asset. Reduction of capital amounts to transfer. Even though the shareholder remained a shareholder after the capital reduction, the first right as a holder of those shares stood reduced with the reduction in the share capital. In the assessee’s case, the capital reduction was effected by cancellation or extinguishment of a certain number of shares and consideration was received pursuant to such capital reduction and the share of the assessee in the subsidiary company remained the same even after the capital reduction. Hence, the loss arising to the assessee upon cancellation of its shares pursuant to reduction of capital in the sum of Rs. 3.64 crores was to be allowed as long-term capital loss eligible to be carried forward to subsequent years.( AY.2011-12)