Whether reduction of number of shares without changing its par value results in capital loss?

Описание: Link of full case : https://taxlawsonline.com/agtlol.html...

(2025) 472 ITR 561 (Karnataka)

Principal Commissioner of Income-tax and Another
V.
Jupiter Capital Pvt. Ltd.

P.S. Dinesh Kumar and Ramachandra D. Huddar, JJ.

20.02.2023

Playlist: 2(47)

2(47): "transfer", in relation to a capital asset

A.Y: 2014-15/Assessee

Question: Whether reduction of number of shares without changing its par value results in capital loss?

1. The number of shares of assessee were reduced from 14,95,44,130 to 9988 by an order of High Court.

2. The face value of the shares had remained same at Rs 10.

3. The assessee had claimed this reduction of number of shares as capital loss.

4. The A.O. disallowed the capital loss on the contention that the voting power had not changed as the percentage of the assessee’s share of 99.88% had remained unchanged.

5. On appeal it was held that if the shares were transferred at face value, the redeemable value would be Rs 99,880 where the value of 14,95,44,130 number of shares would have been Rs 1,49,54,41,300.

6. The Tribunal rightly followed the authority in Kavthikeya v. Sarabhai V. CIT (1997) 228 ITR 163 (SC).

7. There was no error in the order of the Tribunal setting aside the disallowance of capital loss claimed by the assessee by holding that there was extinguishment of rights of shares.

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