HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Anarkali Sarabhai, Shahibag House, Ahmedabad v. Commissioner of Income Tax, Ahmedabad
Civil Appeal No. 541 of 1983
[1997] 1 SCR 500 ·
2(47)(i) · 2(47)(ii) (argument expressly left undecided) · 45 · 261 (appeal certificate)
Sources & disclosures includedDownload original judgment / order
Two-judge bench · S.C. Agrawal, J. · Suhas C. Sen, J.
Assessment years: 1969-70
01 · Facts of the case
For AY 1969-70, with calendar year 1968 as the accounting year, the individual held 297 redeemable preference shares of Universal Corporation Pvt. Ltd. at Rs 1,000 face value each. The company redeemed them for Rs 2,97,000. The source prints the purchase price as Rs 2,68,550 but describes the excess as Rs 30,450; those figures are inconsistent, since their arithmetic difference is Rs 28,450. The note does not substitute that subtraction for an adjudicated gain (physical pages 3–4).
The ITO assessed capital gains, and the Appellate Assistant Commissioner, Tribunal and Gujarat High Court upheld that treatment. The assessee argued that redemption merely returned capital and involved no sale, exchange, relinquishment or relevant extinguishment. A section 261 certificate brought the question to the Supreme Court (physical pages 3–5).
Source: See the proposition-specific paragraph and PDF-page references below.
02 · Discussion by the Hon’ble Court
The definition of transfer is inclusive. To receive the redemption money the shareholder had to give up, abandon or surrender the shares. The Court held that this brought the transaction within section 2(47)(i) as relinquishment. Separately it considered the transaction a sale: under the historical Companies Act, 1956 scheme, the company paid for and took back its preference shares, with section 77(5) preserving redemption under section 80 from the restrictions on a company buying its own shares. The shares here were capital assets, so the resulting surplus attracted section 45 (physical pages 5–8).
The Court distinguished distribution on liquidation in R.M. Amin and found the cited partnership-contribution, amalgamation and machinery-insurance authorities inapposite to this redemption. It agreed with the Bombay High Court’s redemption analysis in Sath Gwaldas Mathuradas Mohata Trust. The final contention was that redemption extinguished the share itself, rather than rights in a continuing asset, so clause (ii) could not apply. Because clause (i) already disposed of the case, the Court expressly declined to decide that contention (physical pages 8–11).
Source: See the proposition-specific paragraph and PDF-page references below.
03 · Judicial decision
The appeal was dismissed and the High Court’s conclusion was affirmed without an order as to costs. Redemption on these facts fell within section 2(47)(i), making the surplus taxable as capital gains under section 45. The Court did not decide the final section 2(47)(ii) contention. The conclusion prints a High Court date inconsistent with the opening appeal particulars; no corrected date or gain amount is inferred (physical page 11, read with pages 3–4).
Source: See the proposition-specific paragraph and PDF-page references below.
04 · Outcome / in whose favour
In whose favour: Revenue
Assessee’s appeal dismissed; High Court result affirmed; no order as to costs
Final capital-gains ruling under section 2(47)(i) for this full redemption
The final clause (ii) contention is expressly reserved. The judgment is not a ruling on every destruction/extinguishment event, every return of capital, liquidation distribution or current buy-back tax treatment.
Source: See the proposition-specific paragraph and PDF-page references below.
05 · AKHB REVIEW POINT
Anchor this authority to the route actually decided: a shareholder surrenders capital-asset preference shares for redemption consideration, amounting to relinquishment and, in the historical corporate-law setting, sale. Do not turn the quoted Bombay reasoning into a Supreme Court determination of the clause (ii) argument that its final paragraph leaves open. Nor does describing the company as buying back shares settle a distinct modern statutory buy-back regime.
A bounded later comparison is available within this batch. Kartikeya V. Sarabhai, 4 September 1997, physical pages 7–8, expressly applied Anarkali to a partial capital reduction and explained the difference between complete and proportionate loss of rights. That later application does not change what Anarkali itself expressly reserved. Current statutory interaction, cost computation and comprehensive subsequent treatment still require separate verification; the inconsistent printed figures and High Court dates should remain visible.
Source: See the proposition-specific paragraph and PDF-page references below.
Proposition-specific source paragraphs and PDF pages
- topic
- Identity, appeal particulars and redemption facts
- source url
- Open cited source
- pdf pages
- 1; 3; 4
- paragraphs
- Unnumbered judicial text
- source role
- reported metadata and judicial text
- topic
- Clause (i) surrender and separate sale analysis
- source url
- Open cited source
- pdf pages
- 5; 6; 7; 8
- paragraphs
- Unnumbered judicial text
- source role
- judicial text
- topic
- Distinguished and quoted precedents
- source url
- Open cited source
- pdf pages
- 8; 9; 10; 11
- paragraphs
- Unnumbered judicial text
- source role
- judicial text
- topic
- Clause (ii) expressly reserved, dismissal and conflicting date
- source url
- Open cited source
- pdf pages
- 11
- paragraphs
- Unnumbered judicial text
- source role
- judicial text
- topic
- Bounded later application to partial reduction
- source url
- Open cited source
- pdf pages
- 7; 8
- paragraphs
- Unnumbered judicial text
- source role
- bounded later judicial treatment
Historical statutory basis
A 1961 Act capital-gains dispute for AY 1969-70, decided under section 2(47)(i) read with section 45. Section 12B of the 1922 Act appears only in the discussion of Rasiklal Maneklal; it is not the charging provision in this appeal.Judicial authorship and separate opinions
Suhas C. Sen, J.Other governing Acts
- act
- Companies Act, 1956
- provisions
- 77(1); 77(5); 80; 85
- role
- Historical preference-share redemption and company purchase restrictions used in the sale analysis
Act identified in the reviewed source
Income-tax Act, 1961Source & verification
Download original judgment / order · Open cited source rendition
Identified source rendition: 11 PDF pages; SHA-256 613241b53eee64a8fec59151d3ab4b6a71577474a354677345358c69d362a05a. Original bytes preserved. Complete unnumbered judicial text physical pages 3–11/SCR 502–510, beginning SEN, J. on page 3. The Court decides section 2(47)(i), expressly declines to decide the final clause (ii) contention, and dismisses without costs. Printed amount and High Court-date inconsistencies preserved.
- Physical pages 3–4/SCR 502–503 print Rs 2,97,000 redemption consideration, Rs 2,68,550 purchase price and Rs 30,450 excess. The first two figures differ by Rs 28,450, not the stated Rs 30,450. The note does not silently correct the source or certify a replacement assessed amount.; Physical page 3 gives the Gujarat High Court judgment date as 18/22.6.82, while the final paragraph at page 11 prints 18/22.8.1992. Both are visually confirmed; the Supreme Court’s own 24 January 1997 date and Civil Appeal 541/1983 are clear. No replacement High Court date is asserted.; The Supreme Court expressly does not express an opinion on the final section 2(47)(ii) submission. Extinguishment language in the quoted Bombay judgment or the later Kartikeya comparison must not erase that reservation.; The source reproduces expanded section 2(47) wording and historical Companies Act, 1956 provisions. Unrelated later-inserted transfer limbs are not treated as the basis for the 1968 redemption; present-law and 2025 equivalence are unverified.; The Rs 50,000 figure on physical page 10 belongs to the embedded Bombay precedent, not this appellant’s redemption.; The partnership-contribution decision bearing Kartikeya’s name at 156 ITR 509, discussed on page 9, is distinct from the September 1997 partial-capital-reduction judgment checked here as later treatment.
Statutory scope
No automatic mapping to the Income-tax Act, 2025 or present-law certification. Apply the statutory text for the relevant year.
Later treatment
Source checked 2026-10-04. Comprehensive later treatment remains not verified. One bounded direct later comparison was completed: Kartikeya V. Sarabhai, 4 September 1997, physical pages 7–8, expressly applied Anarkali to partial preference-capital reduction. This does not establish current-law validity of every proposition or a complete citator result.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
Identified source links
- reported judgment — PDF 11 pages
SHA-256: 613241b53eee64a8fec59151d3ab4b6a71577474a354677345358c69d362a05a
- bounded later reported judgment — PDF 9 pages
SHA-256: b1f8ca894655d683a19a5ae0410a9ade7930c2bc983d0f69256cca1d3df4e327
Related reviewed notes
Coverage, AI disclosure & professional disclaimer
Selected Supreme Court income-tax decisions and procedural orders checked against their identified sources. This collection is not exhaustive. The research catalogue has 2,569 indexed PDF assets, including alternate copies and incidental matches; that is not a count of unique or reviewed judgments. Historical and unreported coverage remains open.
AI-assisted research checked against the identified source. Extraction, interpretation or omission errors remain possible. Source review does not mean independent approval by a practising professional. Verify every material statement against the complete original judgment.
General research information only; not legal or tax advice, a certified judgment or a substitute for the full order. Applicability depends on facts, assessment year, statutory version and jurisdiction. Subsequent treatment is unverified unless a note expressly identifies the sources checked. Downloading does not create a professional engagement. Obtain case-specific advice before reliance.
The official 1961–2025 structural correspondence does not establish that a precedent applies under the new Act. Verify the enacted wording, commencement and transitional provisions separately.