ITO Vs Sunita Sanjeev Aeren (ITAT Delhi)
Mere Reduction in Shareholding Due to Fresh Issue of Shares Cannot Trigger Capital Gains: ITAT Delhi
Delhi ITAT has once again clarified the long-debated question of whether a reduction in percentage shareholding- caused solely by a fresh issue of shares to a third party-can be treated as a “transfer” giving rise to capital gains in the hands of an existing shareholder. In a significant ruling the Tribunal dismissed the Revenue’s appeal & held that no taxable capital gain arises when a shareholder has neither transferred shares nor relinquished any right for consideration.
Background
The assessee was subject to a search operation u/s 132, along with the AEC Group. During the search, authorities seized a MoU valuing a prestigious property at ₹150 crore. This property was jointly owned by two companies-Shrey Properties Pvt. Ltd. & Snerea Properties Pvt. Ltd.-in which the assessee held 2.25% equity each.
During FY 2010–11, both companies issued 30 lakh fresh shares each to AEZ Infratech Pvt. Ltd. (now ADTV Communications Pvt. Ltd.). A portion of these shares was subsequently transferred to Om Shivay Real Estate Pvt. Ltd.
AO viewed this expansion of share capital as a de facto transfer of ownership & control of the underlying immovable property, & consequently treated the assessee’s reduced stake (from 2.25% to 0.562%) as a relinquishment of rights, leading to taxable capital gains of ₹2.53 crore.
