Shares of Lakshmi Vilas Financial institution have been lately delisted and there’s a courtroom battle happening. Given the above state of affairs, is that this thought-about as capital loss and might this be set off in opposition to capital good points whereas submitting IT returns for monetary 12 months 2020-2021? If sure, how can this be proven in ITR? Additionally, what is going to occur if the court docket case seems in favour of traders (i.e) if we present losses now and at a later level if the share worth is settled to the traders by the financial institution?
-Identify withheld on request.
(Reply by Dr. Suresh Surana, Founder, RSM India)
As per provisions of Part 45 of the Revenue Tax Act, 1961, any revenue or achieve arising from the switch of a capital asset shall be chargeable to tax underneath the pinnacle “Revenue from Capital good points”. Additional, part 2(47) of the IT Act defines the time period ‘switch’ in relation to a capital asset. As per the mentioned part, switch contains sale, trade, relinquishment of the asset, extinguishment of any rights therein and many others. This clearly states that capital achieve/loss can come up provided that there’s a switch of capital asset throughout a specific tax interval. As such, mere delisting of a specific share doesn’t lead to switch of a capital asset and Precise achieve/loss will solely come up when the share is “transferred”.
Because the loss just isn’t realised in actual phrases, the identical can’t be used to set off in opposition to the earnings earned throughout that specific tax interval.
To reply your query, as talked about above, since no capital loss would come up to the taxpayer till and until the shares are literally disposed off or extinguished, no capital loss could be required to be proven within the ITR. Nonetheless, the taxpayer could be required to reveal ‘whether or not you will have held unlisted fairness shares at any time in the course of the earlier 12 months?’ within the ITR in accordance with Round No. 18 of 2019 dated eighth August 2019.
Accordingly, despite the fact that the shares are delisted on the time of submitting the return however have been listed at any time in the course of the monetary 12 months in consideration, the small print of such shares could be required to be disclosed within the ITR by the taxpayer together with the PAN of the corporate.
To handle second query, in such case of a state of affairs, there could also be a chance that the good points could be re-determined on the time of settlement after taking the capital loss beforehand allowed to assessee taxpayer.
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Supply: Live Mint