Mass reduction due to emission of photons when a torchlight emits a photon of energy E, will its mass reduce by (E/C^2) according to mass energy equivalance? if no what will be the reduced mass?
 A: Your question does not address a few things, like how the emission of the photon takes place (de-exitation of electrons, molecules losing vibrational and rotational energy), so I will consider all of these cases.
Yes, as the torch emits a photon, the torch will lose energy, and the mass (based on your correct energy mass equivalence) of the torchlight will be reduced.
Not only will the torch lose energy, but it will lose momentum too, by the way (this is not so commonly known), this is because of the atom recoiling when emitting a photon. 
Does an atom recoil when photon radiate?
Now the energy of the torch will be reduced by the amount of energy the photon carries away. The electron (and the whole atomic system) will move to a lower energy level as per QM. (it is not the only way for the object to emit photons, since the object might lose thermal energy, by the way of molecules losing vibrational and rotational energies, and emitting photons).
Please consider a hot object, it is constantly trying to move towards thermal equilibrium with its environment by emitting radiation in the form of photons. Now as the object emits photons, it is constantly losing energy, and thus (based on the energy mass equivalence) it is losing mass.
A: Yes, but you must also considered the energy source. Imagine a torch run by batteries, the reduction of mass will be in batteries and not in radiating material. And if torch is using an outside energy source, there will be no change in the mass of torch. 
