Insertion of new Chapter XII-DA
28. After Chapter XII-D of the Income-tax Act, the following Chapter shall be inserted with effect from the 1st day of June, 2013, namely:—
‘CHAPTER XII-DA
SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED
INCOME OF DOMESTIC COMPANY FOR BUY-BACK OF SHARES
Tax on distributed income to share holders
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 a recognised stock exchange) from a shareholder shall be charged to tax and such company shall be liable to pay additional income-tax at the rate of twenty per cent. on the distributed income.
Explanation.—For the purposes of this section,—
(i) “buy-back” means purchase by a company of its own shares in accordance with the provisions of section 77A of the Companies Act, 1956; (1 of 1956)
(ii) “distributed income” means the consideration paid by the company on buy-back of shares as reduced by the amount which was received by the company for issue of such shares.
(2) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on the distributed income under sub-section (1) shall be payable by such company.
(3) The principal officer of the domestic company and the company shall be liable to pay the tax to the credit of the Central Government within fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares referred to in sub-section (1).
(4) The tax on the distributed income by the company shall be treated as the final payment of tax in respect of the said income and no further credit therefor shall be claimed by the company or by any other person in respect of the amount of tax so paid.
(5) No deduction under any other provision of this Act shall be allowed to the company or a shareholder in respect of the income which has been charged to tax under sub-section (1) or the tax thereon.
Interest payable for non- payment of tax by company
115QB. Where the principal officer of the domestic company and the company fails to pay thewhole or any part of the tax on the distributed income referred to in sub-section (1) of section 115QA, within the time allowed under sub-section (3) of that section, he or it shall be liable to pay simple interest at the rate of one per cent. for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.
When company is deemed to be assesssee in default
115QC. If any principal officer of a domestic company and the company does not pay tax on distributed income in accordance with the provisions of section 115QA, then, he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply.’.
Notes on Clauses:
Clause 28 of the Bill seeks to insert a new Chapter XII-DA relating to special provisions for tax on distributed income of domestic company for buy-back of shares.
The proposed new section 115QA provides that notwithstanding anything contained in any other provision of the Act, any distributed income to a shareholder by a domestic company on buy-back of shares, the shares being not listed on any recognised stock exchange, shall be chargeable to tax and such company shall be liable to pay additional income-tax at the rate of twenty per cent. on the distributed income. The Explanation to the said section defines the expressions “buy-back” which means purchase by a company of its own shares in accordance with the provisions of section 77A of the Companies Act and “distributed income” which means the consideration paid by the company on buy-back of shares as reduced by the amount received by the company for issue of such shares. The proposed additional income-tax shall be in addition to the income-tax chargeable in respect of the total income of such company whether income-tax is payable by the company on its total income or not.
It further provides that the amount of tax shall be remitted within fourteen days of the date of payment of consideration. It also provides that the tax shall be final payment of tax and no credit shall be claimed either by the company or any other person in respect of the tax paid. It also provides that no deduction under any provision of the Act shall be allowed to company or shareholder in respect of the said income or tax.
The proposed new section 115QB provides for the levy of interest, in case of failure to pay tax within the time provided, at the rate of one per cent. for every month and part thereof for such failure.
The proposed new section 115QC provides that in case of failure on payment of tax, the principal officer of the company and the company shall be deemed to be an assessee in default in respect of the amount of tax payable and all provisions of the Act relating to recovery and collection of taxes shall apply.
This amendment will take effect from 1st June, 2013.
