TaxTMI 
TaxTMI 
2017 (2) TMI 1504
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....e in accordance with the provisions of section 77A of the Companies Act, 1956. 2. On the facts and circumstances of the case and in law, the learned AO exceeded his jurisdiction in levying DDT in terms of section 115-O of the Act under the subject proceedings under section 143(2)/(3) of the Act. 3.1 That on the facts and circumstances of the case and in law, the learned AO erred in alleging that the Appellant resorted to the use of colourable device to avoid payment of tax in India while distributing profits to its shareholders. 3.2 That on the facts and circumstances of the case and in law, the learned AO erred in re-characterising the buy-back of equity shares as distribution of dividend under section 2(22)(d) of the Act. 4 That on the facts and circumstances of the case and in law, the learned Dispute Resolution Panel ("DRP") erred in not passing any directions on Grounds of Objections No. 1 to 3 (referred in 'Appendix B' to Form 35A) in relation to the proposed levy of DDT on the buy-back of shares. 5 That on the facts and circumstances of the case and in law, the learned DRP erred in not directing the AO to delete the levy of DDT on buy-back of shares as propose....
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....he buy back price to the holding company. 4. Before us, the learned Authorised Representative of the assessee has submitted that prior to the amendment of Section 115QA by the Finance Act, 2013 w.e.f. 1.6.2013 buy back of shares would result capital gain in the hand of the share holder as per the provisions of Section 46A of I T Act however, the capital gain on account of sale of shares is not taxable in India as per the provisions of DTAA between the India and Maritius. Therefore the Assessing Officer cannot reclassify the transaction of buy back of shares into transaction of dividend distribution for the assessment year under consideration. He has then referred to the provisions of Section 2(22) and submitted that buy back of shares has been excluded from the definition of dividend as per sub-clause (iv) of the exclusion of clause of Section 2(22) of the Act. Hence the learned Authorised Representative has contended that under no circumstances the transaction of buy back can be brought into the definition of dividend as per Section 2(22)(d) of the Act. In support of his contention, he has relied upon the decision of the Mumbai Bench of this Tribunal in the case of Goldman Sachs ....
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...., the same cannot be classified as dividend as per the provisions of Section 2(22) when the exclusion clause (iv) of Section 2(22) has specifically excluded such a payment on purchase of its own shares from a shareholder in accordance with the provisions of Section 77A of the Companies Act from the definition of dividend. For ready reference, we quote clause (iv) of Section 2(22) as under : " Section 2(22) (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)." We further note that Section 115QA has been introduced in the statute by Finance Act, 2013 w.e.f. 1.6.2013. Therefore any payment on account of purchase of its own shares by the company prior to 1.6.2013 cannot be termed as dividend as per the provisions of Section 115QA. We quote Section 115QA as under : " 115QA. (1) Notwithstanding anything contained in any other provision of this Act, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount of distributed income by the company on buy-back of shares (not being shares listed on ....
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....n 48, deemed to be capital gains. Further, sub-clause (iv) of clause (22) of Section 2 of the Act excludes any payment made by a company on purchase of its own shares in accordance with the provisions contained in Section 77A of the Companies Act from the ambit of 'dividend'. Finance Act, 2013 subsequently introduced section 115QA (w.e.f. 1.6.2013) to provide that any amount of distributed income by a company on buyback of unlisted shares shall be charged to tax and the company so distributing its income shall be liable to pay additional income tax at the rate of twenty percent of the distributed income. 2...... 3........ 4. Accordingly, the CBDT hereby clarifies that consideration received on buyback of shares between the period 1.4.2000 till 31.5.2013 would be taxed as capital gains in the hands of the recipient in accordance with section 46A of the Act and no such amount shall be treated as dividend in view of provisions of Section 2(22)(iv). 5. With a view to bring about further clarity on this issue as a step towards non-adversarial tax regime, the CBDT hereby directs that as a matter of general principle, no fresh notice for assessment / reassessment / non-deducti....