Whether Long Term Capital Loss allowed in case of Share Capital Reduction?

Recently, Hon'ble the Supreme Court reiterated that reduction in share capital is covered under Section 2(47) of the Income Tax Act, 1961 and assessee is eligible to claim losses.

- Anirudha Jain

Facts of the Case:

• Jupiter Capital Private Limited is engaged in the business of investing in shares, leasing, financing and money lending.

The assessee had made an investment in Asianet News Network Private Ltd., an Indian company engaged in the business of telecasting news through secondary purchase constituting 99.88% of the total number of paid-up shares.

• Asianet News Network Private Limited incurred losses, as a result of which the net worth got eroded. Subsequently, Asianet News Network Private Limited 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.

• Pursuant to this:

• No. of paid-up equity shares got substantially reduced on a proportionate basis.

• Consideration for such reduction of shares was paid.

• Face value of Asianet News Network Private Limited shares remains unchanged.

• Pursuant to this, assessee claimed long term capital loss accrued on the reduction in share capital.