SHRI KARTIKEYA V.SARABHAI. vs THE COMMISSIONER OF INCOME TAX.

The Supreme Court addressed the issue of whether a reduction in the face value of shares, resulting in a cash payment to shareholders, constitutes a transfer under Section 2(47) of the Income Tax Act, 1961, thereby attracting capital gains tax. The Court held that the reduction did not extinguish the shareholder's rights, and thus, the amount received was not subject to capital gains tax. The ruling reversed the Income Tax Appellate Tribunal's decision, affirming the Appellate Assistant Commissioner's order that the amount was not taxable.