TMI Blog1973 (5) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... JAM., V. RAMASWAMY. JUDGMENT The judgment of the court was delivered by RAMASWAMI J.- The following questions have been referred at the instance of the assessee : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 5,000 was not a capital loss within the meaning of section 12B of the Indian Income-tax Act, 1922 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provision of section 12B of the Indian Income-tax Act, 1922, did not apply to the transaction resulting in the loss of Rs. 53,761 incurred by the assessee ? " The assessee who is a chartered accountant purchased in 1948-50 cumulative prefere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, exchange, transfer or relinquishment of a capital asset ". This view was confirmed by the Appellate Assistant Commissioner and the Tribunal. In this reference the learned counsel for the assessee contended that there could be no doubt that as a result of the company going into liquidation and the irrecoverability of the decree debt, the assessee had suffered a loss, that the loss incurred by him in these two transactions amounts to a relinquishment within the meaning of section 12B and that, therefore, the assessee was entitled to set off these losses against his other capital gains in that year. Shares are movable properties and they are capital assets admits of no doubt. Even in the case of winding up of a company the shareholder wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hment or parting with the right in the shares. As a shareholder when the company went into liquidation the assessee became entitled to receive any surplus that may remain after paying off the liabilities. He also has got certain other rights regarding the management of the company and also taking part in the liquidation proceedings. These rights still continue to vest in the assessee. Because the liquidator found that the assets would not be sufficient even to pay off the secured creditors the assessee does not cease to be a shareholder or a contributory nor any of his rights as a shareholder or contributory are affected, though the share value might have been reduced to nil. In this connection it is useful to refer to the decision of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y off the creditors. Therefore, this is an a fortiorari case and it could not be said that there was any relinquishment of any of the rights of the assessee in the shares. The learned counsel for the assessee also invited our attention to section 481 of the Companies Act which states that when the affairs of the company have been completely wound up or when the court is of opinion that the liquidator cannot proceed with the winding-up of the company for want of funds and assets or for any other reason whatsoever and it is just and reasonable in the circumstances of the case that an order of dissolution of the company should be made, the court shall make an order that the company be dissolved from the date of the order and the company shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position, surely the assessee would be entitled to execute the decree against the debtor and the debtor will not be able to plead satisfaction of the decree merely because the assessee chose to write it off in his books of account. The writing off in his books of account might only suggest that in the opinion of the assessee be might not be able to recover anything from the debtor. It would not, in our opinion, amount to a relinquishment of the debt itself. It is true that relinquishment need not be in favour of the debtor. But still his rights and obligations under the decree could not be said to have been relinquished by merely writing it off in his accounts. Being a decree of a court, until the satisfaction of the decree is entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X
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