Capital loss pursuant to capital reduction is allowable to shareholders even if no consideration is received by the shareholders
• Tata Sons Limited (‘Taxpayer’)1 held equity shares in Tata Tele-Services Company Ltd. (‘TTSL’).
• In view of significant losses incurred by TTSL, scheme of arrangement and re-structuring was entered into between TTSL and its shareholders. Pursuant to scheme, paid-up equity share capital of TTSL was reduced by way of reduction of the number of equity shares. Further, no consideration was paid by TTSL to its shareholders in respect of such cancelled shares.
