Dividend from the company funded by equity involving venture capital say 'A", used by the other promoter, say "B" to buy back the shares of A to maintain the equity at agreed ratio, say 50:50, Say before before buy back equity ration was 70:30, by using the dividend from equity with 70 ratio, erosion in share with 70 is 20. Ratio with 30 will buy back the share will use dividend representing 20 that is in A with 70. What would tax liability on B for benefit derived from this arrangement.
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Tax implication
Replies (1)
In this case there is no tax inplication in hands of B.
Sale of shares by A will be taxable in the hands of A as capital gain.
When B later on sells the shares, then capital gain will arise in the hands of B.
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