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2023 (2) TMI 564 - AT - Income TaxAdditions of Income of other person u/s 60 & 63(b) - transfer of income without transfer of corresponding asset by the assessee - HELD THAT:- Nexus between two independent transaction i.e. reduction of share capital of TGSPL thereby wiping out the entire equity share holding into TGSPL and issue of equity shares by TGSPL by conversion of FCDs allotted to Serco International SARC. In the above two transactions, in our opinion there is no generation of income that could in any manner be transferred to any other person. Hence, application of section 60 of the Act in the present case fails at the first step itself. Reduction in share capital and share premium of TGSPL and conversion of FCDs into equity shares by TGSPL are two independent events. Undisputedly, with reduction in share capital and share premium the equity shares held by assessee in TGSPL have been wiped out. We fail to comprehend as to how said reduction in share capital and share premium results in transfer of profit by the assessee to Serco International SARL, to whom equity shares have been allotted after conversion of fully convertible Debentures. As is evident from records, FCDs were issued by TGSPL to Serco International SARL much prior to reduction in share capital. Since, there is no generation of income there can be no question of transfer of income to any other person. AO and the CIT(A) have erred in invoking the provisions of section 60 of the Act for making addition - Consequently, the impugned order is liable to be set aside on this ground alone. Assessee appeal allowed.
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