Buyback of Shares of Pvt. Ltd. company

1454 views 1 replies

Dear Friends,

A Private ltd company issued shares originally at Rs. 10/- each.

Say Mr. A has been alloted 3000 EQ shares @ 10/- each amounting to Rs. 30,000/-

Now company wants to buyback the said shares at RS. One Crore ( current Intrinsic value ).

In the books of comapny will 2(22)(e) be applicable as he is a major shareholder holding more than 10 %.

I understand that in the books of shareholder he will compute LTCG and prepare his computation of income accordingly.

But in the books of Company the said shares will be eventually be distributed to the remaining shareholders prorata.

Please explain the tax consequences in the books of the company.

CA Rajesh Poddar

 

Replies (1)

dear sir

i think the company can not be covered u/s 2(22)(e) just because of a reason that the shareholder holding more than 10% shares in the company.and dividend shall not include any payment made by a company on purchase of it's own share from a shareholder.in this case company is not required to pay any tax according to my view.shareholder will be liable to pay tax u/h capital gain u/s 46A.

but the company must fullfill the other prescribed conditions for buy back u/s 77A.and the company can not distibuted the said shares with in 6 months of buy back.plz make me correct.

regards

tarun rustagi


CCI Pro

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register