Shares of Lakshmi Vilas Bank have been lately delisted and there’s a courtroom battle happening. Given the above situation, is that this thought of as capital loss and might this be set off in opposition to capital positive aspects whereas submitting IT returns for monetary 12 months 2020-2021? If sure, how can this be proven in ITR? Also, what’s 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?
-Name withheld on request.
(Answer by Dr. Suresh Surana, Founder, RSM India)
As per provisions of Section 45 of the Income Tax Act, 1961, any revenue or acquire arising from the switch of a capital asset shall be chargeable to tax below the pinnacle “Income from Capital gains”. Further, part 2(47) of the IT Act defines the time period ‘transfer’ in relation to a capital asset. As per the mentioned part, switch consists of sale, change, relinquishment of the asset, extinguishment of any rights therein and so forth. This clearly states that capital acquire/loss can come up provided that there’s a switch of capital asset throughout a selected tax interval. As such, mere delisting of a selected share doesn’t lead to switch of a capital asset and Actual acquire/loss will solely come up when the share is “transferred”.
As the loss shouldn’t be realised in actual phrases, the identical can’t be used to set off in opposition to the earnings earned throughout that exact 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. However, the taxpayer could be required to reveal ‘whether you have held unlisted equity shares at any time during the previous year?’ within the ITR in accordance with Circular No. 18 of 2019 dated eighth August 2019.
Accordingly, although the shares are delisted on the time of submitting the return however have been listed at any time through the monetary 12 months in consideration, the main points of such shares could be required to be disclosed within the ITR by the taxpayer together with the PAN of the corporate.
To tackle second query, in such case of a situation, there could also be a chance that the positive aspects could be re-determined on the time of settlement after taking the capital loss beforehand allowed to assessee taxpayer.
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