“extinguishment of rights”

Capital GainsSection 2(47)Section 2(47)59 judgments

The decision most relied on for extinguishment of rights is CIT v. Tata Services Ltd. (122 ITR 594), cited in 76 judgments on BharatTax.

Leading authorities on extinguishment of rights

CIT v. Tata Services Ltd.

122 ITR 594 · 1980 · High Court

citing judgments

A right to purchase property under an agreement to sell is a capital asset as defined under Section 2(14) of the Income-tax Act. The relinquishment or extinguishment of such a right constitutes a transfer of a capital asset, the consideration for which is taxable as capital gains.

CIT v. Grace Collis

248 ITR 323 · 2001 · Supreme Court

citing judgments

The term 'transfer' under Section 2(47) includes the relinquishment of a right to property that creates an interest in the property. However, the extinguishment of rights in shares, when occurring without a formal conveyance, does not attract capital gains.

Vania Silk Mills (P.) Ltd. v. CIT

191 ITR 647 · 1991 · Supreme Court

citing judgments

Extinguishment of rights in a capital asset includes transfer and attracts capital gains computation provisions. Demolition and conversion of a building into scrap constitutes a form of transfer.

CIT v. Mohanbhai Pamabhai

91 ITR 393 · 1973 · High Court

citing judgments

The distribution of capital assets to a partner upon the dissolution of a partnership firm does not constitute a 'transfer' and is therefore not taxable as capital gains.

Kartikeya v. Sarabhai vs. CIT

228 ITR 163 · 1997 · Supreme Court

citing judgments

Extinguishment of substantial rights of a shareholder in an investee company due to reduction of share capital is considered an "extinguishment" within the meaning of 'transfer' under Section 2(47) of the Income Tax Act, even if a third party is not involved.

Malabar Fisheries Co. v. CIT

120 ITR 49 · 1979 · Supreme Court

citing judgments

Distribution, division, or allotment of assets to partners upon dissolution of a firm is a mutual adjustment of rights and not a transfer of assets by the firm, as the firm does not hold separate rights in partnership assets.

Anarkali Sarabhai v. CIT

224 ITR 422 · 1997 · Supreme Court

citing judgments

Redemption of preference shares by a company constitutes a 'transfer' under Section 2(47) of the Income Tax Act, making it subject to capital gains tax under Section 45 for the shareholder.

DCIT v. BPL Sanyo Finance Ltd.

312 ITR 63 · 2009 · High Court

citing judgments

The extinguishment of rights in a capital asset, independent of and otherwise than on account of a transfer, amounts to a short-term capital loss. This includes the forfeiture of share application money or convertible warrants.

Judgments citing extinguishment of rights

Citi Corp International Finance Corporation, Mumbai vs. Asst DIT (It) 1(2)

In the result, both the appeals filed by the assessee are allowed

ITA 2732/MUM/2014[2007-08]Status: DisposedITAT Mumbai14 Feb 2024AY 2007-08

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: Shri Farrokh V. IraniFor Respondent: 17.11.2023

Section 10(34)Section 10(38)Section 143(1)Section 143(2)Section 143(3)Section 2Section 250

provisions were made restricting the vendors from exercising various rights in relation to shares. Revenues’ main contention is that on account of substantial extinguishment of rights in pursuance to share purchase agreement, the transfer took place on 27-1-2005. Per contra, the assessee’s claim is that when ... agreement with the contention of ld. counsel for the assessee that sale as contemplated under section 2(47)(i) and extinguishment of rights as contemplated under section 2(47)(ii) are not mutually interchangeable. If a particular transaction is the transaction of sale then unless the sale is complete

Citicorp International Finance Corporation, Mumbai vs. Addl.D.I.T. (It) RG.-1, Mumbai

In the result, both the appeals filed by the assessee are allowed

ITA 2545/MUM/2011[2007-08]Status: DisposedITAT Mumbai14 Feb 2024AY 2007-08

Bench: Shri Prashant Maharishi, Am & Ms. Kavitha Rajagopal, Jm

For Appellant: Shri Farrokh V. IraniFor Respondent: 17.11.2023

Section 10(34)Section 10(38)Section 143(1)Section 143(2)Section 143(3)Section 2Section 250

Tata Sons Ltd, Mumbai vs. CIT 2, Mumbai

In the result, appeal of the assessee is allowed

ITA 3468/MUM/2016[2009-10]Status: DisposedITAT Mumbai23 Jan 2024AY 2009-10

Section 100Section 263Section 48

acquiring of the Tata Power Co. Ltd shares was not made by the Company upto 17/12/08, the warrants stood forfieted, resuing in extinguishment of rights therein. Reliance is placed on the Supreme Court decisions cited in Note 1 7. This computation of capital gain was filed before ... case the capital asset has been effaced, how there can be rights in it? Once rights cannot be there, there cannot be extinguishment of rights? And further, how there can be consideration on extinguishment of rightsP In case of effaced capital asset the consideration received or accrued will

M/S Flamingo Hotels Pvt. Ltd., Rajkot-Gujarat vs. The Income Tax Officer, Ward-1, Gandhidham.

In the result, the appeal of the assessee is dismissed with the above directions

ITA 64/RJT/2015[2010-11]Status: DisposedITAT Rajkot10 Nov 2023AY 2010-11

Bench: Smt.Annapurna Gupta & Ms.Suchitra Raghunath Kambleassessment Year : 2010-11 M/S.Flamingo Hotels P.Ltd. Ito, Ward-1 Plot No.416 Gandhidham. Ward-2B Adipur-Kutch.

For Appellant: Shri Vimal Desai, ld.ARFor Respondent: Shri Shramdeep Sinha, ld.CIT-DR

Section 2(47)Section 250(6)Section 45

finding that there was transfer of building in the year of destruction of the asset i.e. in Asst.Year 2001-02 on extinguishment of right in the building. He noted that reliance placed by the AO on the decision of Hon’ble Apex Court in the case of CIT Vs. Grace ... case of CIT Vs. Grace Collis (supra) was rendered in different set of facts and had not dealt on the issue of extinguishment of rights in assets particularly on destruction. Hon’ble Madras High Court held that therefore the decision of Hon’ble Supreme Court in Vania Silk Mills

Assistant Commissioner of Income Tax, Circle 1(1), Raipur vs. Meserss T.C. Buildcon Private Limited, Raipur

In the result CO filed by the assessee is allowed and the appeal filed by the revenue stands dismissed

ITA 173/RPR/2019[2011-12]Status: DisposedITAT Raipur27 Oct 2023AY 2011-12

Bench: Shri Ravish Sood, Jm & Shri Arun Khodpia, Am Assistant Commissioner Of Vs M/S. Tc Buildcon Pvt. Ltd. Income Tax, Circle 1(1) Vasudev, B-5, Sector-5, Raipur, (C.G.) Devendra Nagar, Raipur (C.G.) Pan: Aacct4516F Cross Objection No. 26/Rpr/2019 (Arising Out Of Ita No. 173/Rpr/2019) (िनधा"रण वष" / Assessment Year : 2011-12) Assistant Commissioner Of Vs M/S. Tc Buildcon Pvt. Ltd. Income Tax, Circle 1(1) Vasudev, B-5, Sector-5, Raipur, (C.G.) Devendra Nagar, Raipur (C.G.) Pan: Aacct4516F (अपीलाथ" /Appellant) (""यथ" / Respondent) .. िनधा"रती क" ओर से /Assessee By : Shri Sunil Kumar Agrawal, Ca राज"व क" ओर से /Revenue By : Shri V.K. Singh, Cit-Dr सुनवाई क" तार"ख / Date Of Hearing : 16-08-2023 घोषणाक" तार"ख/Date : 27-10-2023 Of Pronouncement आदेश / O R D E R Per Arun Khodpia, Am:

For Appellant: Shri Sunil Kumar Agrawal, CAFor Respondent: Shri V.K. Singh, CIT-DR

Section 142(1)Section 144Section 147Section 148

Developer, thus has contributed in the form of land in the Joint Development Agreement, in turn the assessee as consideration towards the extinguishment of rights in the land has received 29% of the properties constructed apart from cash consideration of Rs, 2.70 Crore. In such a case taxability

New India Construction Co.Ltd, New Delhi vs. ITO, Ward-18(2), New Delhi

The appeal of the assessee is dismissed with a liberty to approach this Tribunal, if so advised

ITA 5960/DEL/2018[2010-11]Status: DisposedITAT Delhi17 Jan 2023AY 2010-11

Bench: Shri Kul Bharat

Section 143(3)Section 147Section 250

Income-tax Act, 1961 (in short “the Act”) was framed vide order dated 31.08.2017. Thereby the Assessing Officer made addition in respect of extinguishment of rights of Noida property by way of reduction in share holding amounting to Rs. 1,62,192/-. Aggrieved against this the assessee preferred appeal before

ACIT Cent .Cir6(4), Mumbai vs. M/S. Kenneth Builders & Developers Ltd, Mumbai

In the result, the appeal of the revenue stand dismissed

ITA 2396/MUM/2021[2017-18]Status: DisposedITAT Mumbai30 Dec 2022AY 2017-18

Bench: Shri Aby T Varkey & Shri Amarjit Singhthe Asstt. Commissioner Vs. Kenneth Builders & Of Income Tax, Cc-6(4) Developers Limited Room No. 1925, 19Th 15Th Floor, Tower – 1, Floor, Air India Building, Indiabulls Finance Center Nariman Point, Senapati Bapat Marg, Mumbai- 400021 Elphistone, Mumbai - 400013 स्थायी लेखा सं./जीआइआर सं./Pan/Gir No: Aacck8268P Appellant .. Respondent

For Appellant: Rakesh RanjanFor Respondent: K. Gopal & Om Kandalkar

Section 115JSection 143(2)

Assessing Officer said amount was received in extinguishment of its rights. According to him as per the provisions of section 2(47) (11) extinguishment of rights in a capital asset amounted to transfer and the capital gain arising thereon would be taxable as per provisions of section 45. The Assessing

Shapoorji Pallonji Infrastructure Capital, Mumbai vs. DCIT-3(3), Mumbai

Appeal is dismissed

ITA 3906/MUM/2019[2014-15]Status: DisposedITAT Mumbai27 Dec 2022AY 2014-15

For Appellant: Shri C.S. AnanthanFor Respondent: Shri Mahita Nair

Section 143(3)Section 2(47)

3906/Mum/2019 Assessment Year: 2014-15 7. The learned Authorised Representative for the Appellant submitted that reduction of capital results in extinguishment of rights held in shares and therefore, qualifies as „transfer‟ in terms of Section 2(47) of the Act. The reduction of capital has the effect of reducing ... Grace Collis: 248 ITR 323 (SC), allowed the claim for Long Term Capital Loss by holding that the extinguishment of rights of the shareholders as a result of reduction of share capital results in „transfer‟. 8. Per Contra, the Learned Departmental Representative relied upon the order passed by the Assessing

M/S. Global Arkitekts Pvt. Ltd., Chennai vs. ITO, Corporate Circle - 2 (2), Chennai

ITA 708/CHNY/2020[2009-10]Status: DisposedITAT Chennai30 Nov 2022AY 2009-10

Bench: Hon’Ble Shri V. Durga Rao & Hon’Ble Shri Manoj Kumar Aggarwal, Am

For Appellant: Shri S. Sridhar (Advocate) &For Respondent: Shri S. Chandrasekaran (JCIT) – Ld. Sr. DR

Section 143(3)Section 147

Appeals) failed to appreciate that in any event having not disputed the grant of possession as on 24.01.2007 coupled with the extinguishment of rights by the Appellant, the business income derived from sale of the impugned asset shall not be chargeable to tax during the assessment year under consideration

M/S Mitchell Associates, Mumbai vs. ITO 19(2)(3), Mumbai

Appeal is allowed

ITA 1718/MUM/2019[2013-14]Status: DisposedITAT Mumbai20 May 2022AY 2013-14

For Appellant: Shri K Gopal

Section 143(2)Section 143(3)Section 54E

authorities. He submitted that as per consent terms, 24.03.2012 the Developer agreed to pay a compensation of INR 60,00,000/- for relinquishment/ extinguishment of right in the Flat. The payment of INR 60,00,000 was to be made by the Developer as follows ... on/by 03.09.2012, that the Appellant agreed for registration of a cancellation deed. Accordingly, Cancellation Deed, dated 11.09.2012, was registered on 12.09.2012 leading to extinguishment of rights in the Flat. Accordingly, the Appellant had offered to tax LTCG of INR 15,94,000/- as income for the Assessment Year

Tree Hill Estates Private Limited, Bangalore vs. Deputy Commissioner of Income Tax Circle-7(1)(1), Bangalore

In the result, the appeal of the assessee is dismissed

ITA 1395/BANG/2018[2013-14]Status: DisposedITAT Bangalore18 May 2022AY 2013-14

Bench: Smt. Beena Pillai & Ms. Padmavathy Sassessment Year : 2013-14

For Appellant: Shri Padamchand Khincha, CAFor Respondent: Shri Sumer Singh Meena, CIT(DR)(ITAT), Bengaluru

relinquishment of rights in the assets of the firm. He also held that there is a transfer by way of extinguishment of rights, as a partner in the firm. The AO relied upon the decision in J.K. Kashyap v ACIT (2008) 302 ITR 255 (Del) which held that

M/S Godha Realtors Pvt Ltd, Bangalore vs. The Assistant Commissioner of Income Tax Central Circle-2(2), Bangalore

In the result, both the appeals of the assessee are allowed

ITA 1116/BANG/2018[2008-09]Status: DisposedITAT Bangalore02 Feb 2022AY 2008-09

Bench: Shri N.V. Vasudevan & Shri B.R. Baskaran

For Appellant: Shri V. Srinivasan, A.RFor Respondent: Shri Sumer Singh Meena, D.R

entertained the view on the reasoning that the transaction entered between the assessee and Shri Ramaiah Reddy is akin to “extinguishment of rights” in the capital asset as per the definition of the term “transfer” given in sec.2(47) of the Act. Accordingly, he took the view that the capital ... held that the agreement to sell will not result in transfer of asset. In that case, there is no question of any extinguishment of right, as held by the AO and confirmed by Ld CIT(A). Hence the question of assessing any capital gain in AY 2008-09 does

M/S Godha Realtors Pvt Ltd, Bangalore vs. The Assistant Commissioner of Income Tax Central Circle-2(2), Bangalore

In the result, both the appeals of the assessee are allowed

ITA 1115/BANG/2018[2011-12]Status: DisposedITAT Bangalore02 Feb 2022AY 2011-12

Bench: Shri N.V. Vasudevan & Shri B.R. Baskaran

For Appellant: Shri V. Srinivasan, A.RFor Respondent: Shri Sumer Singh Meena, D.R

Chaturanan Industries Ltd., New Delhi vs. DCIT, New Delhi

The appeal is dismissed

ITA 3565/DEL/2016[2009-10]Status: DisposedITAT Delhi30 Sept 2021AY 2009-10

Bench: Shri Kul Bharat & Dr. B.R.R. Kumar[Assessment Year: 2009-10] Chaturanan Industries Ltd. The Dcit, H-108, Connaught Circus, Central Circle-20(Now Cc-8), New Delhi-110001 New Delhi-110055 Pan-Aaacc0762G Assessee Revenue

Section 132Section 143(3)Section 153CSection 2(14)Section 2(47)(ii)

Monnet Ispat & Energy Ltd is not a capital asset u/s 2(14) of the Income Tax Act, 1961 when in fact it is extinguishment of rights therein and covered u/s 2(47)(ii) of the Income Tax Act, 1961. 3.3) The Ld. CIT-(A) has concluded that forfeiture of share

Commissioner of Income Tax Del vs. M/S Abhuinandan Investments Lt

Appeals are allowed

ITA - 853 / 2005HC Delhi07 Aug 2020

Section 260ASection 391Section 47

them. If the Legislature intended to extend the definition to any 2020:DHC:2490-DB ITA 822/2005 & connected matters Page 26 of 37 extinguishment of right, it would not have included the obvious instances of transfer, viz., sale, exchange, etc. Hence, the expression 'extinguishment of any rights therein' will have ... confined to the extinguishment of rights on account of transfer and cannot be extended to mean any extinguishment of right independent of or otherwise than on account of transfer." (p. 653) 13. The learned counsel for the assessees relied upon this decision to contend, again, that there had been

Commissioner of Income Tax Del vs. M/S M/S Jindal Equipment Leasi

Appeals are allowed

ITA - 935 / 2005HC Delhi07 Aug 2020

Section 260ASection 391Section 47

Commissioner of Income Tax Del vs. M/S Mansarovar Investments Ltd

Appeals are allowed

ITA - 961 / 2005HC Delhi07 Aug 2020

Section 260ASection 391Section 47

CIT vs. M/S Teletube Electronics Ltd

The appeal of the Assessee is allowed

ITA - 132 / 2002HC Delhi24 Sept 2015

Section 2Section 2(47)Section 260ASection 45Section 50

Narang Diary Products (1996) 219 ITR 478 (SC). Reference has also been made to Section 2 (47) (ii) which talks of the "extinguishment of rights". 45. If the lease agreement dated 24th February 1994 is read carefully it is clear that no proprietary right is created in favour

Commissioner of Income Tax vs. Shri Chand Ratan Bagri

The appeal is dismissed

ITA - 31 / 2010HC Delhi20 Jan 2010

For Appellant: Ms P.L. Bansal with Ms Anshul SharmaFor Respondent: Mr Salil Aggarwal with Mr Prakash Kumar

Section 2(47)Section 45

said decision the Supreme Court observed that: “Hence the expression “extinguishment of any rights therein” will have to be confined to the extinguishment of rights on account of transfer and cannot be extended to mean any extinguishment of right independent of or otherwise than on account of transfer.” 7. Secondly ... this court in Vania Silk Mills Pvt. Ltd.‟s case [1991] 191 ITR 647. In our view, the definition clearly contemplates the extinguishment of rights in a capital asset distinct and independent of such extinguishment consequent upon the transfer thereof. We do not approve, respectfully, of the limitation