Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2020 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (2) TMI 325 - AT - Income TaxDisallowance of capital loss on account of capital reduction scheme - case of the assessee is that reduction of capital had resulted in ‘Extinguishment of rights in shares’ and we find that the definition of ‘transfer’ u/s 2(47) includes ‘extinguishment of any rights’ in a capital asset - HELD THAT:- Assessee had incurred capital loss only due to claim of indexation benefit and not otherwise. The benefit of indexation is provided by the statute and hence there cannot be any malafide intention that could be attributed on the assessee in claiming the long term capital loss in the subject mentioned transaction. AO had held that there is no transfer pursuant to reduction of capital. But it is a fact that the assessee had indeed received a sale consideration of ₹ 39.99 crores towards reduction of capital . This sale consideration was not sought to be taxed by the ld AO under any other head of income. This goes to prove that the ld AO had indeed accepted this to be sale consideration received on reduction of capital under the head ‘capital gains’ only as admittedly the same was received only for the capital asset i.e shares. Hence the existence of a capital asset is proved beyond doubt. The capital gains is also capable of getting computed in the instant case as the cost of acquisition of shares of CHIPL and sale consideration received thereon are available. Then how the ld AO is justified to hold that the subject mentioned transaction does not tantamount to ‘transfer’ u/s 2(47) of the Act. This is the short dispute before us. We find lot of force in the argument advanced by the ld AR in this regard that merely because the transaction resulted in loss due to indexation, the ld AO had ignored the same. Had it been profit or surplus even after indexation, the ld AR argued that the ld AO could have very well taxed it as capital gains. Thus:- (a) capital reduction was effected by cancellation/ extinguishment of certain number of shares; (b) a consideration was received pursuant to such capital reduction; (c) the share of the assessee in the investee company remained the same even after the capital reduction. Loss arising to the assessee for cancellation of its shares in CHIPL pursuant to reduction of capital should be allowed as long term capital loss eligible to be carried forward to subsequent years. Accordingly, the grounds raised by the assessee in this regard are allowed.
|