| Case ID |
428dd944-aebc-4362-8c59-d8a1aac952c7 |
| Body |
View case body. Login to View |
| Case Number |
IT REFERENCE NO. 24 OF 1978 |
| Decision Date |
Aug 22, 1982 |
| Hearing Date |
Aug 18, 1982 |
| Decision |
The Gujarat High Court held that the redemption of preference shares by a company constitutes a transfer under section 2(47) of the Income-tax Act, thus making the assessee liable for capital gains tax. The court reasoned that whether shares are redeemed or capital is reduced, the result is the same: a return of capital. The court emphasized that the payment received by the shareholder upon redemption represents the extinguishment of rights in those shares. The ruling aligns with previous case law, affirming that such transactions fall under capital gains tax provisions. |
| Summary |
In the case of Anarkali Sarabhai v. Commissioner of Income Tax, the Gujarat High Court addressed the taxation of capital gains arising from the redemption of preference shares. The court determined that the redemption of shares constitutes a transfer, invoking section 2(47) of the Income-tax Act, 1961. The decision clarified that both redemption and reduction of capital effectively return capital to shareholders, resulting in an extinguishment of their rights in the shares. The ruling is significant for taxpayers and legal practitioners navigating capital gains tax issues, particularly regarding preference shares and their treatment in taxation. This case underscores the importance of understanding the tax implications of share transactions, especially in the context of corporate actions like redemption and capital reduction. It serves as a precedent for future cases involving similar issues, reinforcing the principle that the return of capital through share redemption triggers tax obligations under the Income-tax Act. |
| Court |
Gujarat High Court
|
| Entities Involved |
Not available
|
| Judges |
A.M. AHMADI,
R.C. MANKAD
|
| Lawyers |
K.C. Patel for the Applicant,
B.R. Shah for the Respondent,
G.N. Shah for the Respondent
|
| Petitioners |
Anarkali Sarabhai
|
| Respondents |
Commissioner of Income Tax
|
| Citations |
1982 SLD 1279,
(1982) 138 ITR 437
|
| Other Citations |
CIT v. R.M. Amin [1971] 82 ITR 194 (Guj.),
CIT v. Mohanbhai Pamabhai [1973] 91 ITR 393(Guj.),
Kartikeya V. Sarabhai v. CIT [1982] 8 Taxman 214 (Guj.),
CIT v. Vania Silk Mills (P.) Ltd.[1977] 107 ITR 300 (Guj.),
Scottish Insurance Corporation Ltd. v. Wilson & Clude Coal Co. Ltd. [1948] AC 462
|
| Laws Involved |
Income-tax Act, 1961
|
| Sections |
45,
2(47)
|