1987 (1) TMI 78

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....d under the head ' Capital gains ' ? " The reference relates to the assessment year 1975-76. The assessee had purchased 1,000 cumulative fully paid redeemable preference shares of Mr. R. S. Rekchand Spinning and Weaving Mills (P.) Ltd., Hinganghat, from Shri Girdhardas Mohota before 1970. The purchase price was Rs. 50 per share as against the fully paid-up value of Rs. 100 per share. During the accounting year relevant to the assessment year 1975-76, the company redeemed the preference shares held by the assessee by payment of Rs. 1,00,000 for 1,000 shares. A sum of Rs. 36,630 was paid by the company in addition towards dividend. The dividend was offered for assessment and was duly assessed. However, the assessee's gain of Rs. 50,000 in ....

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....eliance was placed in support on the case of CIT v. G. Narasimhan [1979] 118 ITR 60 (Mad). We will deal with that judgment first. The point involved in that case was whether there was any extinguishment of any capital asset held by the assessee as a result of reduction of capital by the company. The basic facts in the said decision were that the assessee held 70 shares out of 2,400 shares of Rs. 1,000 each in a private limited company. Daring the accounting period ending on March 31, 1963, relevant to the assessment year 1963-64, the capital of the company was reduced, the result of which was to reduce the value of each share from Rs. 1,000 to Rs. 210. Consequent on this reduction, there was distribution of assets and money to the sharehold....