1983 (10) TMI 106

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....tal from Rs. 5 to Re. 1 per share. The Hon'ble High Court of Delhi confirmed the reduction of the share capital by the order dated19-4-1977and18-5-1977. Accordingly, there was refund of Rs. 4 per share in respect of 16,161 shares held by the assessee in the company out of its accumulated profits. The assessee received in all Rs. 82,780 from the company after the reduction of the share capital. This amount was treated as deemed dividend under section 2(22)(d) of the Income-tax Act, 1961 ('the Act'). The assessee accepted the position. After the reduction of the share capital on21-3-1978, 16,160 shares were sold and one share was sold on29-11-1977. The share sold on29-11-1977was, however, registered in the name of the purchaser, Shri V. V. Pu....

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....ical facts in IT Appeal No. 1676 (Delhi) of 1982 dated23-7-1983, the Tribunal in the case of another shareholder held that the capital loss arose. He has also supported the order by pointing out the relevant provisions in the Act dealing with the question as to what is the cost of acquisition of shares. The learned departmental representative contended that the cost of acquisition of shares should be taken at Re. 1 per share after the reduction of the share capital and therefore, the order of the Commissioner (Appeals) should be accepted. 6. There is no doubt that the order of the Tribunal relied on by Mr. Monga clearly supports his case and we agree with the conclusion arrived at by the Bench. But we wish to discuss the matter a little ....

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....on, arising on reduction of share capital. Having dealt with the matter so elaborately in respect of all other situations, reduction of share capital has not been touched upon. This we think has been deliberately done. May be as contended by Mr. Monga that the provision with regard to taxability of deemed dividend would take care of the situation but whatever may be the reason, we are not able to find anything in sub-section (2) of section 55 to cover a situation arising on reduction of share capital as far as the determination of cost of acquisition is concerned. There is no doubt that the cost of acquisition of shares by the assessee is Rs. 5 per share. The fact that there was reduction of share capital and that she received a part of the....