Reduction in Share Capital Amounts To Transfer of Capital Asset Under Income Tax Act : Supreme Court
- Case Name: Principal Commissioner of Income Tax-4 & Anr v. M/s. Jupiter Capital Pvt. Ltd.
- Judge(s): Justice J.B. Pardiwala, Justice R. Mahadevan
The Supreme Court ruled that share capital reduction qualifies as a "transfer" under Section 2(47) of the Income Tax Act, 1961, covering relinquishment or extinguishment of rights.
It upheld ITAT’s decision allowing Jupiter Capital Pvt. Ltd. to claim long-term capital loss.
Referring to Kartikeya V. Sarabhai (1997) and Anarkali Sarabhai v. CIT (1997), the Court emphasized that sale isn’t the only mode of transfer; relinquishment or reduction in shareholder rights also constitutes a transfer.
It noted that reducing share capital, even without changing face value, extinguishes rights, triggering capital gains tax under Section 45.
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