TMI Blog1996 (1) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... year 1987-88 for which the previous year ended on 29-3-1987. In the return the assessee claimed deduction in respect of the aforesaid capital loss. The Income-tax Officer while completing the assessment under section 143(3) observed that the assessee held 15390 equity shares in ACIL for Rs. 1,68,399 which figure was written off in the assessee's books and was claimed as capital loss. He was of the view that since there was no transfer in terms of section 45 read with section 2(47) of the Act, the claim cannot be allowed. He referred to the judgments of the Madras High Court in the case of Sundaram Industries (P.) Ltd. v. CIT [1969] 74 ITR 243 and in the case of C.A. Natarajan v. CIT [1973] 92 ITR 347. 3. It was contended in appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee to write off the value thereof in its books and claim deduction as capital loss. Apart from the statutory provisions which we have referred to above, he relied on the following judgments of the Madras High Court in support of the claim : 1. CIT v. M.A. Alagappan [1977] 108 ITR 1000 2. CIT v. A. F. Harvey Ltd. [1990] 185 ITR 342 5. The Ld. D.R. submitted that the provisions of section 46(2) were not applicable. He pointed out that it is not a provision enabling the assessee to claim capital loss. He further contended that at any rate the loss was not allowable in the present year. In support of his submission the Ld. D.R. strongly relied on the orders of the revenue authorities. 6. On a careful consideration of the rival con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares became nil, it cannot be stated that there was a transfer of the capital asset in the relevant previous year. All that had happened was only a fall in the value of the shares and that does not justify the assessee's claim that there was a transfer of the capital asset. The order of the High Court dated 21-11-1986 on company petition no. 377 of 1974 is an order passed under section 433 of the Companies Act on the petition of M/s. Babulal Krishna Gopal, a partnership firm, which was a creditor of ACIL. The High Court has directed that the ACIL be wound up by the Court under the provisions of the Companies Act. The effect of this order is not that the company has been finally dissolved. That result would follow only where an order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose rights are neither extinguished nor obliterated, only the contents of those rights and the manner of their exercise become altered. " The above statement of the law by the jurisdictional High Court is binding on us and we have to, therefore, hold that the rights in the shares held by the assessee were not extinguished as soon as the order was passed by the High Court on 21-11-1986. 7. In the case of C.A. Natarajan the Madras High Court held at page 351 that if the winding up proceedings of the company were not over or an order of dissolution under section 481 of the Companies Act is not passed by the High Court in the relevant accounting year, the question whether the assessee would be entitled to claim capital loss on the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived some money or assets from the company under liquidation. In the present case the provisions are not attracted at all since it has not been shown --- in fact the assessee has no such case --- that it has received any money from the liquidator. Mr. Lahari contended that the assessee did not receive any thing from the company which according to him means that he received Rs. nil from the company and, therefore, the said Rs. nil should be taken as full value of consideration for the purpose of section 48 and from this figure of Rs. nil the cost of acquisition of the shares had to be deducted under section 48 which would give a negative figure, which must be treated as capital loss and allowed. We are afraid that such an interpretation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely because the official liquidator had found that the assets would not be sufficient to pay the secured creditors and, therefore, the assessee cannot expect to receive any thing from him, the assessee did not cease to be a shareholder or contributory nor are any of his rights as a shareholder or contributory affected, though the value of the shares may be reduced to nil. On this basis it was held that the assessee was not entitled to the allowance of capital loss. This decision squarely applies to the present case. Though the Madras High Court was concerned with section 12B of the old Act where the word "transfer" did not include extinguishment of the rights of the assessee in the capital asset while section 2(47) of the 1961 Act includes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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