Buyback of Shares of Pvt. Ltd. company

Rajesh Poddar (Chartered Accountant) (321 Points)

25 April 2010  

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