Income tax on buyback of shares by unlisted company
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
09 June 2016
A Pvt Ltd company proposed to buyback its own equity shares from its shareholder at its book value. The book value of shares say is Rs.50/-. The shares are earlier issued at Rs.10/- and Rs. 100/-.
As per Section 115QA the tax is payable on difference of consideration received by company for issue of shares and consideration paid by the company for buy back of shares.
Now in above case the shares are issued at different price. The difference is as under:
Case 1 Case 2
Buy-back price 50/- 50/-
Issue price 10/- 100/-
Difference 40/- (-) 50/-
My query is whether the negative figure of case 2 can be adjusted with positive figure of case I at the time of calculation of tax payable U/Sec 115QA?
As per Section 115QA the tax is payable on difference of consideration received by company for issue of shares and consideration paid by the company for buy back of shares.
Now in above case the shares are issued at different price. The difference is as under:
Case 1 Case 2
Buy-back price 50/- 50/-
Issue price 10/- 100/-
Difference 40/- (-) 50/-
My query is whether the negative figure of case 2 can be adjusted with positive figure of case I at the time of calculation of tax payable U/Sec 115QA?
CA SUNIL K GARG
(Expert)
11 June 2016
This negative figure can't be adjusted with positive figure as per section 115QA of the Income Tax Act, 1961. As this is the main objective behind introduction of this section.
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