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TMI Blog2023 (2) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... elf. Reduction in share capital and share premium of TGSPL and conversion of FCDs into equity shares by TGSPL are two independent events. Undisputedly, with reduction in share capital and share premium the equity shares held by assessee in TGSPL have been wiped out. We fail to comprehend as to how said reduction in share capital and share premium results in transfer of profit by the assessee to Serco International SARL, to whom equity shares have been allotted after conversion of fully convertible Debentures. As is evident from records, FCDs were issued by TGSPL to Serco International SARL much prior to reduction in share capital. Since, there is no generation of income there can be no question of transfer of income to any other perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account as capital reduction by TGSPL. The said write off was reflected in the Profit Loss Account for the year ended 31/03/2016 as exceptional item. A copy of Statement of Profit Loss is at page 214 of the paper book. The same was added back by the assessee while computing its taxable income. The ld. Counsel for the assessee pointed that the statement of computation of taxable income at page 215 would show that the starting of the computation of total income is from Net profit as per P L Account i.e. Rs.40,67,555/- (i.e. before the exceptional item). In the course of scrutiny assessment proceedings the Assessing Officer invoked provisions of section 60 of the Income Tax Act, 1961 [ in short the Act ] and made addition of Rs.496,25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction in share capital by TGSPL of the shares allotted to the assessee, has resulted in benefit to another group company Serco International SARL. 3. Aggrieved by the assessment order dated 27/12/2018 assessee carried the issue in appeal before the CIT(A). The CIT(A) without appreciating facts of the case upheld assessment order confirming addition under provisions of section 60 and 63(b) of the Act and dismissed the appeal of assessee. The ld. Counsel for the assessee submits that the transaction of reduction in share capital and conversion of FCDs into equity shares are two separate independent transaction. The ld. Counsel for the assessee reiterated that there is no generation of income in the transaction of reduction in share capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bare perusal of section 60 would show that the section will come into operation if: (i) There is generation of income; (ii) such income is transferred by overriding title, by the owner of the asset yielding such income; (iii) the owner keeps the title in the assets unto himself. In such circumstances the income transferred arising out of the retained assets shall be chargeable to income tax as the income of the transferor. Section 63(b) defines the expression transfer , the same is reproduced below: Section 63 : (b) transfer includes any settlement, trust, covenant, agreement or arrangement. In the instant case, for application of section 60, the first condition to be satisfied is generation of income. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liable to be set aside on this ground alone. We hold and direct accordingly. Ground No.3 of appeal is thus, allowed. 6. In ground No.4 of appeal, the assessee has raised an alternate contention to the primary contention raised in ground No.3 of the appeal. Since, we have allowed ground No.3 of appeal, ground No.4 has become infructuous. 7. In ground No.5 of the appeal the assessee has raised a fresh ground claiming capital loss while computing total income of the assessee /appellant. The ld. Counsel for the assessee on instructions from the assessee stated that he is not pressing this ground. In view of the statement made by ld. Counsel for the assessee ground No.5 is dismissed as not pressed. 8. In ground No.6 of appeal, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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