Hon’ble Supreme Court held that as a result of reducing the face value of the shares the share capital is reduced and the right of preferential shareholder to the dividend or his share capital and the right to share in the distribution of the net assets upon liquidation is extinguished proportionately to the extent of reduction in the capital. Such a reduction of the right of the capital asset clearly amounts to a “transfer” under section 2(47) of the Act and any profit or gain which arises from the transfer of such capital asset is taxable under section 45 of the Act.(AY. 2014-15)
PCIT v. Jupiter Capital Pvt. Ltd. (2025) 472 ITR 616 /303 Taxman 95 (SC) Editorial : Pr CIT v. Jupiter Capital (P.) Ltd. [IT Appeal No. 299 of 2019 dated 20-2-2023] (para 10) affirmed. (2025) 472 ITR 561 (Karn.) (HC)
S. 2(47) : Transfer-definition-“Extinguishment of any right there in”-Reduction of share capital by company amounts to reduction of rights of shareholder to share in distribution of net assets upon liquidation extinguished proportionately-Such reduction of rights is Transfer within the meaning of section 2(47) of the Act.[S. 45]
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