Mumbai bench of the Tribunal decision
The Mumbai bench of the Tribunal held that the reduction of the share capital of a company by way of the cancellation of shares is an extinguishment of rights in shares and is to be treated as a “transfer” for applying capital gains tax provisions. The tribunal also held that the capital gains tax provisions will apply even if no consideration is actually payable by the company provided the consideration is otherwise conceivable or ascertainable.
The tribunal set aside the revisionary order passed by the Principal Commissioner of Income-tax (PCIT) rejecting the claim of long-term capital loss allowed by the tax officer. The tribunal observed that when there were different possible views and the tax officer had followed one possible view, the order of the tax officer could not be held as erroneous and could not be set aside or cancelled by the PCIT.
The case is: Tata Sons Limited v. CIT
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