- Case
- PRINCIPAL COMMISSIONER INCOME TAX 4 BENGALURU 2 v. M/S JUPITER CAPITAL PRIVATE LIMITED (Supreme Court of India, 02-01-2025)
- Law
- Companies Act, Income-tax Act.
The Income Tax Act, 1961: The judgment extensively discusses Section 2(47), which defines "transfer" in relation to a capital asset. The court interprets this section to include the relinquishment of an asset or the extinguishment of any rights therein, even if it doesn't amount to a sale. The court refers to the Assessing Officer's view that reduction in shares did not result in the transfer of a capital asset as envisaged in Section 2(47). The judgment also quotes the Assessing Officer's observations regarding the interpretation of "extinguishment of rights" under Section 2(47). The judgment further elaborates on Section 2(47) by stating that it is an inclusive definition and provides that relinquishment of an asset or extinguishment of any right therein amounts to a transfer of a capital asset. The court also discusses Section 45, which deals with capital gains arising from the transfer of a capital asset. It states that any profit or gain arising from the transfer of a capital asset is liable to be taxed under Section 45. The judgment also refers to Section 48 in conjunction with Section 46(2) regarding the computation of capital gains.
Companies Act, 2013: The judgment mentions Section 66 of the Companies Act, 2013, stating that a company has a right to reduce its share capital, and one of the modes is to reduce the face value of the preference share. The judgment also refers to Section 77(1) of the Companies Act, 1956 (though the Act of 2013 is in force), stating that no company limited by shares shall have the power to buy its own shares, but reduction of share capital or redemption of shares is an exception to this rule.
General Principles of Law: The judgment discusses the principle that the expression "extinguishment of any right therein" is of wide import and covers every possible transaction which results in the destruction, annihilation, extinction, termination, cessation, or cancellation, by satisfaction or otherwise, of all or any of the bundle of rights. The judgment also emphasizes that the legislature cannot be presumed to have made a deeming provision to bring about an anomalous result.
