When cutting calories to shed pounds, you will lose a combination of fat and muscle weight. But your goal should be to lose more fat than muscle.
More lean mass means a better body composition (less body fat %) - helping you look more toned and lean overall. Muscle is also your storage place for carbs (in the form of glycogen), meaning you can process carbs and store them more efficiently, the more muscle you have - leading to less body fat storage. So when it comes to losing weight, maintaining your muscle is going to be a huge benefit.