Buyback of Shares not “Receipt of Property” under section 56(2)(viia)
For Assessment Year 2016–17, the taxpayer undertook a buyback of 1,90,097 equity shares at a consideration of INR 10 per share, aggregating to INR 19,00,970 which were cancelled as part of the buyback process. During the assessment proceedings, the Assessing Officer (‘AO’) determined the fair market value (‘FMV’) of the shares at ₹1,836 per share, as per Rule 11UA of the Income-tax Rules, 1962. Based on this valuation, the AO concluded that the shares were acquired by the taxpayer at a price significantly lower than their FMV and accordingly made an addition of approximately INR 34.71 Crore under Section 56(2)(viia) of the Incometax Act, 1961 (‘the Act’).
