PRINCIPAL COMMISSIONER OF INCOME TAX-4 & ANR. versus M/S JUPITER CAPITAL PVT. LTD.

Citation: [2025] 1 S.C.R. 431 · Decided: 01-01-2025 · Supreme Court of India · Bench: J.B. PARDIWALA, R MAHADEVAN · Disposal: Dismissed

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Judgment (excerpt)

[2025] 1 S.C.R. 431 : 2025 INSC 38
Principal Commissioner of Income Tax-4 & Anr. 
v. 
M/s Jupiter Capital Pvt. Ltd.
(Special Leave Petition No. 63 of 2025)
02 January 2025
[J.B. Pardiwala and R. Mahadevan, JJ.]
Issue for Consideration
Whether reduction in share capital is covered under “sale, exchange 
or relinquishment of the asset” used in Section 2(47) of the Income 
Tax Act, 1961.
Headnotes†
Income Tax Act, 1961 – s.2(47) – “sale, exchange or 
relinquishment of the asset” – Reduction in share capital, 
if covered within the expression “sale, exchange or 
relinquishment of the asset”:
Held: Yes – Reduction in share capital of the subsidiary company 
and subsequent proportionate reduction in the shareholding 
of the assessee, is squarely covered within the ambit of the 
expression “sale, exchange or relinquishment of the asset” used in 
s.2(47) – s.2(47) is an inclusive definition, inter alia, providing that 
relinquishment of an asset or extinguishment of any right therein 
amounts to a transfer of a capital asset – While the taxpayer 
continues to remain a shareholder of the company even with the 
reduction of share capital, it could not be accepted that there 
was no extinguishment of any part of his right as a shareholder 
qua the company – When as a result of the reducing of the face 
value of the preference share, the share capital is reduced, the 
right of the preference shareholder to the dividend or his share 
capital and the right to share in the distribution of the net assets 
upon liquidation is extinguished proportionately to the extent of 
reduction in the capital – Such a reduction of the right of the capital 
asset amounts to a transfer within the meaning of s.2(47) – In the 
present case, the face value per share remained the same before 
the reduction of share capital and after the reduction of share 
capital – However, as the total number of shares were reduced 
432
[2025] 1 S.C.R.
Digital Supreme Court Reports
from 15,35,05,750 to 10,000 and out of this the assessee was 
holding 15,33,40,900 shares prior to reduction and 9988 shares 
after reduction, it can be said that on account of reduction in 
the number of shares held by the assessee in the company, the 
assessee extinguished its right of 15,33,40,900 shares, and in 
lieu thereof, it received 9988 shares at Rs. 10 each along with an 
amount of Rs. 3,17,83,474 – No error committed by High Court 
in passing the impugned order dismissing the appeal filed by the 
Revenue and affirming the order passed by the ITAT. [Paras 9, 
10, 12, 14, 18]
Case Law Cited
Kartikeya V. Sarabhai v. Commissioner of Income Tax [1997] Supp. 
3 SCR 746 : (1997) 7 SCC 524  – relied on.
Commissioner of Income Tax v. Vania Silk Mills (P.) Ltd. (1977) 
107 ITR 300 (Guj) : 1976 SCC OnLine Guj 92; Commissioner 
of Income-Tax v. Jaykrishna Harivallabhdas (1998) 231 ITR 108 : 
1997 SCC OnLine Guj 255; Anarkali Sarabhai v. CIT [1997] 1 
SCR 500 : (1997) 3 SCC 238 :  – referred to.
List of Acts
Income Tax Act, 1961; Companies Act, 2013.
List of Keywords
Section 2(47) of the Income Tax Act, 1961; Reduction in share 
capital; Transfer of a capital asset; Sale; ‘transfer’; “sale, 
exchange or relinquishment of the asset”; Relinquishment of 
an asset; Extinguishment of any right; Subsidiary company; 
Subsequent proportionate reduction in the shareholding of 
the assessee; Inclusive definition, Preference share; Right of 
the preference shareholder; Reducing of the face value of the 
preference share.
Case Arising From
EXTRAORDINARY APPELLATE JURISDICTION: Special Leave 
Petition (Civil) No. 63 of 2025
From the Judgment and Order dated 20.02.2023 of the High Court 
of Karnataka at Bengaluru in ITA No. 299 of 2019
[2025] 1 S.C.R. 
433
Principal Commissioner of Income Tax-4 & Another v.  
M/s Jupiter Capital Pvt. Ltd.
Appearances for Parties
N. Venkataraman, A.S.G., Raj Bahadur Yadav, Suyash Pandey, 
Navanjay Mahapatra, V. Chandrashekhara Bharathi, Chinmayee 
Chandra, Advs. for the Petitioners.
Judgment / Order of the Supreme Court
Order
1.	
Delay condoned.
2.	
This petition is at the instance of the Revenue, seeking leave to 
appeal against the judgement and order dated 20.02.2023 passed 
by the High Court of Karnataka at Bengaluru in Income Tax Appeal 
(ITA) No. 299 of 2019 by which the appeal filed by the Revenue 
against the judgement and order passed by the ITAT Bengaluru 
came to be dismissed and thereby the judgement and order passed 
by the ITAT came to be affirmed. 
3.	
Th

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