PCIT & ANR. Vs Jupiter Capital Pvt. Ltd. (Supreme Court of India)
Supreme Court held that the reduction in share capital of the subsidiary company results into the transfer of capital asset as envisaged in section 2(47) of the Income Tax Act. Accordingly, petition of revenue dismissed.
Facts- The respondent-assessee is a company engaged in the business of investing in shares, leasing, financing and money lending. The assessee had made an investment in Asianet News Network Pvt. Ltd., an Indian company engaged in the business of telecasting news, by purchasing 14,95,44,130 shares having face value of Rs 10/- each. Thereafter, the assessee purchased 38,06,758 shares from other parties, thereby increasing its shareholding to 15,33,40,900 shares which constituted 99.88% of the total number of shares of the company, i.e., 15,35,05,750.
The said company incurred losses, as a result of which the net worth of the company got eroded. Subsequently, the company filed a petition before the Bombay High Court for reduction of its share capital to set off the loss against the paid-up equity share capital. The High Court ordered for a reduction in the share capital of the company from 15,35,05,750 shares to 10,000 shares. Consequently, the share of the assessee was reduced proportionately from 15,33,40,900 shares to 9,988 shares. However, the face value of shares remained the same at Rs. 10 even after the reduction in the share capital. The High Court also directed the company for payment of Rs. 3,17,83,474/- to the assessee as a consideration.
