Whether a company needs to pay Dividend Distribution Tax in case of Buy back of Equity Shares?????????
8 Replies
Sanket
(!..Live to Give..!)
(16427 Points)
Replied 08 September 2011
Buy back is not dividend hence ddt not applicable....
Ravi Chopra
(CA)
(661 Points)
Replied 08 September 2011
IT is not a dividend . So no DDT on it
Dividend includes—
(a) any distribution by a company of accumulated profits, whether
capitalised or not, if such distribution entails the release by the
company to its shareholders of all or any part of the assets of the
company ;
(b) any distribution91 to its shareholders by a company of debentures,
debenture-stock, or deposit certificates in any form, whether
with or without interest, and any distribution to its preference
shareholders of shares by way of bonus, to the extent to which the
company possesses accumulated profits, whether capitalised or
not ;
(c) any distributionmade to the shareholders of a company on its
liquidation, to the extent to which the distribution is attributable
to the accumulated profits of the company immediately before its
liquidation, whether capitalised or not ;
(d) any distribution to its shareholders by a company on the reduction
of its capital, to the extent to which the company possesses
accumulated profits which arose after the end of the previous
year ending next before the 1st day of April, 1933, whether such
accumulated profits have been capitalised or not ;
(e) any payment by a company, not being a company in which the
public are substantially interested, of any sum (whether as representing
a part of the assets of the company or otherwise)
[made after the 31st day of May, 1987, by way of advance or loan
to a shareholder93, being a person who is the beneficial owner of
shares (not being shares entitled to a fixed rate of dividend
whether with or without a right to participate in profits) holding
not less than ten per cent of the voting power, or to any concern
in which such shareholder is a member or a partner and in which
he has a substantial interest (hereafter in this clause referred to
as the said concern)] or any payment by any such company on
behalf, or for the individual benefit, of any such shareholder, to
the extent to which the company in either case possesses accumulated
profits ;
but “dividend” does not include—
(i) a distribution made in accordance with sub-clause (c) or subclause
(d) in respect of any share issued for full cash consideration,
where the holder of the share is not entitled in the event of
liquidation to participate in the surplus assets ;
[(ia) a distribution made in accordance with sub-clause (c) or subclause
(d) in so far as such distribution is attributable to the
capitalised profits of the company representing bonus shares
allotted to its equity shareholders after the 31st day of March,
1964, [and before the 1st day of April, 1965] ;]
(ii) any advance or loan made to a shareholder 97[or the said concern]
by a company in the ordinary course of its business, where the
lending of money is a substantial part of the business of the
company ;
(iii) any dividend paid by a company which is set off by the company
against the whole or any part of any sum previously paid by it and
treated as a dividend within the meaning of sub-clause (e), to the
extent to which it is so set off;
[(iv) any payment made by a company on purchase of its own shares
from a shareholder in accordance with the provisions of section
77A of the Companies Act, 1956 (1 of 1956);
(v) any distribution of shares pursuant to a demerger by the resulting
company to the shareholders of the demerged company (whether
or not there is a reduction of capital in the demerged company).]
Ankit Agarwal
(Article)
(204 Points)
Replied 08 September 2011
@ Ravi chopra: bro Buy back is also a kind of reduction of capital???
Ravi Chopra
(CA)
(661 Points)
Replied 08 September 2011
@ ankit - Capital reduction means decreasing the value of share. I.e. Rs 10 share paid up to Rs 5 shares paid up. this may be as per internal construction scheme.
Also Buy back is specific point referred in bold points.. It prevails over general term i.e. reduction in share capital!!
Ravi Chopra
(CA)
(661 Points)
Replied 08 September 2011
There it is mentioned... Distribution on reduction of capital and not ditribution on cancellation of shares
Ankit Agarwal
(Article)
(204 Points)
Replied 08 September 2011
thanx ravi.i got my answer......thanku
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