TaxTMI 
TaxTMI 
2024 (1) TMI 749
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....the capital reduction transaction undertaken by the company during the year- made by the A.O. without appreciating the fact that the share capital reduction by payments to the shareholders is buy-back of shares and provisions of section 115QA of the Act is attracted." 2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the alleged reduction was of 86,36,363 shares with Face Value of Rs. 10/-, which amounts to Rs. 8,63,63,630/- of the capital & the amount paid to reduce this capital was of Rs. 110/- per share amounting to Rs. 94,99,99,930/- which clearly pin points that the reduction has been made to profit the shareholder." 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that if a scheme is allowed as per the directions of the Hon. High Court which was adjudicated on the basis of petition moved by the assessee, it does not imply that tax u/s. 115QA would not be payable." 4. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) failed to appreciate a relevant point submitted by the assessee vide para no 4.19 of the appellate order that the sha....
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....0/-. iii. Pursuant to the scheme two shareholders of the company namely New Vernon Infratech , Mauritius { Foreign shareholder } and Kotak Investments Advisors Limited { Indian Shareholder} for reduction of their shares by 6917727 and 1718636 equity shares respectively. iv. The above sum of premium of Rs 100/- per share for 8636363 equity shares amounting to Rs. 86,36,44,409/- was adjusted against security premium account of Rs 369682071/- and revaluation reserve of Rs. 493962338/- . v. There was no surplus in the profit and loss account in the company. 06. The learned Assessing Officer on the above transaction issued a notice on 21st December, 2019, holding that the payment of Rs.94,99,99,930/- attracts the provision of Section 115QA of the Income-tax Act, 1961 (the Act) and asked to furnish certain other details. 07. The assessee responded stating that i. capital reduction is by way of order of the Hon'ble Bombay High Court. ii. Such capital reduction has been completed prior to 1st June, 2016. iii. Up to 31st May, 2016, the provision of Section 115QA of the Act would apply only where a buy back is undertaken in accordance with provision of Section 77A of the Co....
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....,39,170/-. The assessment order was passed on 28th December, 2019. 09. The assessee aggrieved with the order preferred the appeal before the learned CIT (A), who decided the issue as per paragraph no.6.2 of his order following the decision of the co-ordinate Bench in ITA No.3726/Mum/2015 in case of Goldman Sachs (India) Securities Pvt. Ltd. Vs. ITO dated 12th February, 2016, wherein it was held that the conditions provided in section 77A of the Act are applicable only to buy back of shares and further the conditions applicable to Section 100 to 104 and Section 391 of the Companies Act, cannot be imported and made applicable to buy back under Section 77A of the Act. Accordingly, he held that the learned Assessing Officer was not justified in invoking the Provisions of Section 115QA/ QB to the payment made to the shareholders as a result of capital reduction scheme and therefore, he cancelled the tax liability of Rs.28,49,39,179/-. The learned Assessing Officer is aggrieved with the same and is in appeal. 010. The learned Departmental Representative stated that i. Section 115QA provides for the levy of additional income tax at the rate of 20% of the distributed income on account ....
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....n 77A of the Act and provision of reduction of capital are coverd under Section 100 to 104 read with section 391 of the Companies Act. The Companies Act, 1956 has now been replaced by Companies Act, 2013, wherein Section 68 of the Act with effect from 1st April, 2014 covers the provisions of buy back of shares and Section 66 with effect from 15th December, 2016, covers the provision by reduction of capital. iii. He further referred to the provisions of Section 115QA of the Act introduced with effect from 1st June, 2013, iv. He submits that earlier even in the buyback of shares as well as in the return of capital there was no incidence of taxation in the hands of the company. Prior to that date, the buyback was taxable in the hands of the shareholder as capital gain under Section 46 A of the Act. The reduction of share capital was taxable in the hands of the shareholders as deemed dividend under Section 2(22) of the Act to the extent of accumulated profit and any balance amount was chargeable to tax in the hands of the share holders on reduction of share capital as capital gain. v. He further stated that after the introduction of Section 115QA of the Act with effect from 1st J....
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....it was not under Section 77A of the Act but was with specific reference to the capital reduction only. He therefore submitted that learned CIT (A) is correct in holding that on the capital reduction no tax under Section 115QA of the Act is payable. 012. On specific query that whether the amount of capital gain tax has been paid by the shareholders or not, the assessee submitted a copy of no.15CB, wherein remittance was made to Mauritius shareholding stating that such capital gain on capital reduction is not chargeable to tax in India according to Article 13 of India Mauritius DTAA. He submitted that 15CA and 15CB submitted on 30th May, 2016, whereas the actual amount of remittance of Rs.113,47,80,000/- was made. He submitted that there is no query on this issue by the learned Assessing Officer. With respect to Kotak advisor as certificate was submitted stating PAN number that they have offered the gain under the head capital gain in their return of income. Thus, in nutshell, the claim of Assessee is that capital gain arising to the Mauritius shareholder is not subject to tax under Section 115QA of the Act. Further, such income is also not chargeable to tax in India in the hands of....
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....on certificate for reduction of equity share capital of maximum 91 lakh shares. ii. Further, on 29 January 2016 the shareholders have given their consent to convene the extraordinary general meeting for reduction of equity share capital by maximum of 91 lakh shares. iii. On 30 January 2016, board resolution was passed of proving the capital reduction under section 100 - 104 of the companies act, which was approved by the Board of Directors. iv. On 30 January 2016, the notice of extraordinary general meeting was issued to the shareholders to convene the meeting on second of February 2016. v. On second of February 2016, the EGM was convened and a spatial resolution passed where shareholders approved the reduction of maximum of 91 lakh shares. vi. On 4 February 2016 a petition was filed before the honourable Bombay High Court for reduction of capital under section 100-104 of the companies act and vii. on 16 April 2016 the honourable High Court has passed its order approving the capital reduction scheme. viii. On 2 May 2016 the shareholders granted their consent to reduce the share capital for which may 2016 board meeting was convened approving the capital reduction of 86....