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2016 (4) TMI 481 - DELHI HIGH COURTReduction of share capital - Held that:- There is no legal impediment in the petitioner company seeking a reduction in its share capital, which is to be utilized towards distribution of assets which are in excess of its needs. The RD, in its reply/ report, clearly admits as much by making a specific reference to the fact that reduction in capital may be effected by paying up paid-up capital, which is in excess of one’s needs, and that, this can be achieved either with or without extinguishing or reducing liability qua its shares. The petitioner company had already denied that it would be effecting reduction in share capital either by writing off its long term loan and advances or cash, which is shown in the assets side of the balance sheet. 9.1 Even as per the RD, the petitioner company had no accumulated loss on the date of the preparation of the provisional balance sheet. As to the observation of the RD, that the reduction in share capital is being sought to distribute brought forward profits of the petitioner company, to escape payment of tax on distribution of profits, is an observation which is not backed by any relevant provision of the Income Tax Act, 1961. As a matter of fact, because such an observation had been made by the RD in his reply/ affidavit, the matter was re-listed in court for directions on 29.03.2016. Consequent thereto, an affidavit dated 31.03.2016 has been filed on behalf of the petitioner company. The petitioner company has undertaken via the said affidavit to pay all income tax liabilities, if any, that may arise upon approval of the prayer made for reduction in share capital. Therefore, for all these reasons, the reduction of unwanted paid-up capital against excess assets appearing in the balance sheet of petitioner company, as obtaining on 31.10.2013, is approved in terms of the special resolution dated 19.12.2013 passed in the EOGM of its shareholders.
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