Executive Summary:
This notification from the Central Board of Direct Taxes amends the Income-tax Rules of 1962. It introduces "PART VIIBA" concerning special provisions for tax on distributed income of domestic companies for buyback of shares, specifically defining the amount received by the company in respect of issue of share. The rules are effective from June 1, 2016.
Key Points / Main Content:
* **Amendment Details:**
* The Income-tax Rules, 1962 are amended through the insertion of "PART VIIBA".
* This part addresses special provisions for tax on distributed income of domestic companies related to the buyback of shares.
* **Rule 40BB: Amount Received by the Company in Respect of Issue of Share:**
* Determines the amount received by a company for shares issued, which are subject to buyback under Section 115QA.
* For shares issued via subscription, the amount includes any premium actually received.
* If any sum has been returned out of the amount received, then it will be deducted from the amount received for share issuance, unless the sum was chargeable to additional income tax under section 115O and the company has paid such additional income tax.
* For shares issued under employee stock option plans or as sweat equity, the fair market value credited to share capital and premium accounts is deemed the amount received.
* Defines "sweat equity shares" with reference to Section 17(2)(vi)(b).
* In case of amalgamated companies, the amount received by the amalgamating company for shares is deemed the amount received by the amalgamated company.
* For resulting companies in a demerger, the amount received is proportional to the net book value of assets transferred in the demerger.
* The amount received by the demerged company is reduced by the amount calculated in the demerger as per subrule 6.
* For shares issued as consideration for asset acquisition or liability settlement, a formula (Amount received = A/B) is provided, using fair market value determined by a merchant banker.
* Defines "merchant banker" with reference to Rule 3(8)(iv)(b).
* For shares issued on succession or conversion of a firm, a formula (Amount received = (A-B)/C) is provided using book values of assets and liabilities.
* Shares issued without consideration based on existing shareholding are deemed to have nil consideration.
* For shares issued on conversion of preference shares, bonds, or other securities, the amount received is the amount received for the converted instrument.
* For shares held in dematerialized form without distinct identification, a first-in-first-out (FIFO) method is applied.
* In any other case, the face value of the share shall be deemed to be the amount received by the company for issue of the share.
Impact Analysis:
* **Domestic Companies:**
* Impact: Affected by the new tax provisions related to the buyback of shares and the determination of income from such buybacks.
* Action Required: Must comply with the new rules for calculating the amount received for share issuance, accurately determine tax liabilities, and maintain appropriate records.
* **Central Board of Direct Taxes (CBDT):**
* Impact: Responsible for implementing and administering the amended Income-tax Rules, 1962.
* Action Required: Ensure effective communication and enforcement of the new regulations, provide guidance and clarification to taxpayers as needed.
* **Taxpayers/Shareholders:**
* Impact: Need to understand the implications of the new tax rules on the buyback of shares and the tax treatment of income received from such buybacks.
* Action Required: Seek professional advice to ensure compliance with the new regulations, properly report income from share buybacks, and maintain accurate records.
* **Merchant Bankers:**
* Impact: Play a role in determining the fair market value of assets or liabilities when shares are issued as consideration for acquisition or settlement.
* Action Required: Ensure that the valuation is performed accurately and in compliance with the prescribed guidelines, provide necessary documentation to support the valuation.
Key Entities Referenced
Income-tax Act, 1961: The primary legislation being amended.
New Delhi: The city where the notification was issued.
Central Board of Direct Taxes: The issuing authority for the notification.
Income-tax Rules, 1962: The rules being amended by this notification.
Income-tax 28th Amendment, Rules, 2016: Title of the amendment rules.
Section 115QA: Section of the Income-tax Act, 1961 related to tax on distributed income of companies.
NIRAJ KUMAR: Under Secretary, Tax Policy and Legislation.
October 17, 2016: Date of the notification.
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PART II—Section 3—Sub-section (i)
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No. 723] NEW DELHI, MONDAY, OCTOBER 17, 2016/ASVINA 25, 1938
िव(cid:7275) म(cid:7074)ं ालय
(राज(cid:7021)व िवभाग)
(के(cid:7008)(cid:7076)ीय (cid:7079)(cid:7004)य(cid:6979) कर बोड)(cid:6981)
अिधसचू ना
नई (cid:7408)द(cid:7016)ली, 17 अ(cid:7334)ूबर, 2016
(आय-कर)
सा.का.िन. 982(अ).—क(cid:7286)(cid:7076)ीय (cid:7079)(cid:7004)य(cid:6979) कर बोड,(cid:6981) आय-कर अिधिनयम, 1961 (1961 का 43) क(cid:7409) धारा 295 के साथ
प(cid:7407)ठत धारा 115थक (cid:7367)ारा (cid:7079)द(cid:7275) शि(cid:7334)य(cid:7298) का (cid:7079)योग करत े (cid:7263)ए, आय-कर िनयम, 1962 का और संशोधन करन े के िलए
िन(cid:7388)िलिखत िनयम बनाता ह,ै अथा(cid:6981)त ्:--
1. (1) इन िनयम(cid:7298) का संि(cid:6979)(cid:7385) नाम आय-कर (अ(cid:7350)ाईसवा ंसंशोधन) िनयम, 2016 ह ै।
(2) ये 1 जून, 2016 से (cid:7079)वृ(cid:7004)त ह(cid:7298)गे ।
2. आय-कर िनयम, 1962 म(cid:7286) भाग 8ख के प(cid:7019)च ात ्िन(cid:7388)िलिखत भाग अंतः(cid:7021)थािपत (cid:7408)कया जाएगा, अथात(cid:6981) ्:--
‘भाग 8खक
(cid:7059)य (cid:7367)ारा शये र(cid:7298) को वापस लने ेके िलए दशे ी कंपनी क(cid:7409) िवत(cid:7407)रत आय पर कर स ेसबं िं धत िवशषे उपबधं
40खख. शये र(cid:7298) के िनगम(cid:6981) के सबं धं म (cid:7286)कंपनी (cid:7367)ारा (cid:7079)ा(cid:7009)त रकम—(1) धारा 115थक क(cid:7409) उपधारा (1) के (cid:7021)प (cid:7020)ट ीकरण के खंड (ii)
के (cid:7079)योजन(cid:7298) के िलए (cid:7408)कसी कंपनी (cid:7367)ारा उसके (cid:7367)ारा जारी शेयर(cid:7298) के संबधं म (cid:7286) (cid:7079)ा(cid:7009)त रकम, जो उ(cid:6989)त धारा म (cid:7286) िन(cid:7416)द(cid:7020)ट (cid:7059)य (cid:7367)ारा
वापस लेने क(cid:7409) िवषय-व(cid:7021) तु ह,ै का अवधारण इस िनयम के अनसु ार (cid:7408)कया जाएगा ।
4859 GI/2016 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
(2) जहा ं शेयर का कंपनी (cid:7367)ारा (cid:7408)कसी (cid:7018)य ि(cid:6989)त को (cid:7079)ित(cid:7088)िु त के मा(cid:7007)य म से िनग(cid:6981)म (cid:7408)कया गया है, ऐस े शेयर के संबंध म (cid:7286)
कंपनी (cid:7367)ारा वा(cid:7021) तव म(cid:7286) (cid:7079)ा(cid:7009) त रकम, िजसके अतं ग(cid:6981)त (cid:7079)ीिमयम के मा(cid:7007)य म से (cid:7079)ा(cid:7009)त वा(cid:7021)त िवक रकम ह,ै वह रकम होगी, जो कंपनी
(cid:7367)ारा ऐस ेशेयर के िनग(cid:6981)म के िलए (cid:7079)ा(cid:7009)त क(cid:7409) गई ह ै।
(3) जहा ं कंपनी ने (cid:7408)कसी भी समय शेयर को (cid:7059)य (cid:7367)ारा वापस लेन े से पूव (cid:6981) ऐस े शेयर के संबंध म (cid:7286) (cid:7079)ा(cid:7009)त रकम स े (cid:7408)कसी
रािश को लौटा (cid:7408)दया ह ै तो इस (cid:7079)कार वापस क(cid:7409) गई रािश स े रकम को घटा (cid:7408)दया जाएगा, घटी (cid:7263)ई रकम कंपनी (cid:7367)ारा उ(cid:6989)त
शेयर के िनग(cid:6981)म के िलए (cid:7079)ा(cid:7009) त रकम होगी :
परंत ु इस (cid:7079)कार वापस रािश या उसका कोई भाग धारा 115ण के अधीन अित(cid:7407)र(cid:6989)त आय-कर स े (cid:7079)भाय (cid:6981) था और
कंपनी ने अित(cid:7407)र(cid:6989)त आय-कर का संदाय (cid:7408)कया ह ैतो, यथाि(cid:7021)थ ित, ऐसी रािश या उसके भाग को कम नह(cid:7277) (cid:7408)कया जाएगा ।
(4) जहां कंपनी (cid:7367)ारा शेयर का (cid:7408)कसी योजना या सक ् (cid:7409)म के अधीन िनग(cid:6981)म (cid:7408)कया गया ह,ै िजसके अधीन (cid:7021)ट ॉक के या
(cid:7021) वीट सा(cid:7013) या शेयर के भाग के (cid:7272)प म (cid:7286) िवक(cid:7016) प के (cid:7272)प म (cid:7286)िवक(cid:7016)प का सृजन (cid:7408)कया गया ह,ै िनयम 3 के उपिनयम (8) के अनुसार
शेयर का यथा संगिणत उिचत बाजार मू(cid:7016)य को जहां तक उसका शेयर पूंजी म (cid:7286) और (cid:7079)ीिमयम लेख े म(cid:7286) कंपनी (cid:7367)ारा (cid:7079)(cid:7004)य य (cid:7408)कया
गया ह,ै को उ(cid:6989) त शेयर के िनग(cid:6981)म के िलए कंपनी (cid:7367)ारा (cid:7079)ा(cid:7009)त रकम माना जाएगा ।
(cid:7021) प(cid:7020) टीकरण—इस िनयम के (cid:7079)योजन(cid:7298) के िलए “(cid:7021)व ीट सा(cid:7013)य ा शये र” का वह(cid:7277) अथ(cid:6981) होगा, जो उसका धारा 17 के खंड 2
के उपखंड (vi) के (cid:7021) प(cid:7020) टीकरण म (cid:7286)है ।
(5) जहा ं शेयर(cid:7298) का िनग(cid:6981)म (cid:7408)कसी कंपनी (cid:7367)ारा, जो समामिे लत कंपनी ह,ै समामले न क(cid:7409) (cid:7021)क (cid:7409)म के अधीन (cid:7408)कसी
समामिेलत कंपनी के शेयर या शेयर(cid:7298) के बदले (cid:7408)कया गया ह,ै तब समामले क कंपनी (cid:7367)ारा ऐस ेशेयर या शेयर(cid:7298) के संबंध म(cid:7286) (cid:7079)ा(cid:7009)त
रकम का अवधारण इस िनयम के अधीन (cid:7408)कया जाएगा, रकम वह रकम होगी, जो समामेिलत कंपनी (cid:7367)ारा उसके (cid:7367)ारा जारी
शेयर(cid:7298) के संबंध म(cid:7286) (cid:7079)ा(cid:7009)त (cid:7263)ई ह ै।
(6) (cid:7408)कसी िन(cid:7414)वलयन क(cid:7409) (cid:7021)क (cid:7409)म के अधीन (cid:7408)कसी प(cid:7407)रणामी कंपनी (cid:7367)ारा उस (cid:7272)प म(cid:7286) िनग(cid:6981)म शेयर(cid:7298) के संबधं म(cid:7286) (cid:7079)ा(cid:7009)त
रकम, वह रकम होगी जो वह रकम ह ै जो िन(cid:7414)वलीन कंपनी (cid:7367)ारा मलू शेयर(cid:7298) के संबंध म(cid:7286) (cid:7079)ा(cid:7009)त क(cid:7409) गई ह,ै िजसका अवधारण
इस िनयम के अनसु ार उसी अनपु ात म(cid:7286) (cid:7408)कया गया ह ै जो िन(cid:7414)वलयन म (cid:7286) अंत(cid:7407)रत आि(cid:7021)त के बही म(cid:7016)ू य का ऐसे िन(cid:7414)वलयन से पवू (cid:6981)
िन(cid:7414)वलीन कंपनी के शु(cid:7373) मू(cid:7016) य का ह ै।
(7) (cid:7408)कसी िन(cid:7414)वलीन कंपनी (cid:7367)ारा िन(cid:7414)वलीन कंपनी म (cid:7286) मूल शये र(cid:7298) के संबंध म(cid:7286) (cid:7079)ा(cid:7009)त मलू रकम को उपिनयम (6) के
अधीन इस (cid:7079)कार आई रकम स ेघटाया (cid:7263)आ माना जाएगा ।
(8) जहा ं शेयर(cid:7298) का आबंटन या िनगम(cid:6981) (cid:7408)कसी आि(cid:7021)त के अज(cid:6981)न या (cid:7408)कसी दािय(cid:7004)व के िनपटान के (cid:7079)ितफल के (cid:7272)प म (cid:7286)
(cid:7408)कया गया ह ै तब ऐस े शेयर के िनग(cid:6981)म के िलए कंपनी (cid:7367)ारा (cid:7079)ा(cid:7009)त रकम का अवधारण िन(cid:7013)न िलिखत स(cid:7074)ू के अनसु ार (cid:7408)कया
जाएगा ।
(cid:7079)ा(cid:7009) त रकम = क/ख
जहां
क = िन(cid:7013) न रकम(cid:7298) से िन(cid:7013) नतर कोई रकम—
(क)(cid:32) वािण(cid:6996) य ब(cid:7289)कर (cid:7367)ारा यथा अवधा(cid:7407)रत आि(cid:7021)त या दािय(cid:7004)व का उसी अनपु ात म(cid:7286) उिचत बाजार म(cid:7016)ू य , जो (cid:7079)ितफल
के भाग के (cid:7272)प म,(cid:7286) शेयर(cid:7298) के िनग(cid:6981)म (cid:7367)ारा कुल (cid:7079)ितफल का ह ै;
(ख)(cid:32) आि(cid:7021) त के अज(cid:6981)न के िलए (cid:7079)ितफल क(cid:7409) रकम या शेयर(cid:7298) के (cid:7272)प म (cid:7286) सदं (cid:7004)त दािय(cid:7004)व का िनपटान, उस सीमा तक
जहां तक उनका (cid:7079)(cid:7004) यय कंपनी क(cid:7409) शेयर पूंजी और शेयर (cid:7079)ीिमयम खाते म(cid:7286) (cid:7408)कया जाता है ;
ख = (cid:7079)ितफल के भाग के (cid:7272)प म (cid:7286)कंपनी (cid:7367)ारा िनग(cid:6981)म (cid:7408)कए गए शये र(cid:7298) क(cid:7409) सं(cid:6990)य ा :¹Hkkx IIµ[k.M 3(i)º Hkkjr dk jkti=k % vlk/kj.k 3
(cid:7021) प(cid:7020) टीकरण—इस उपिनयम के (cid:7079)योजन(cid:7298) के िलए, "वािण(cid:6996)य बक(cid:7289) र" का वही अथ(cid:6981) होगा जो उसका िनयम 3 के उपिनयम (8) के
खंड (iv) के उपखंड (ख) म(cid:7286) ह ै।
(9) जहा ं शेयर(cid:7298) का िनग(cid:6981)म या आबंटन (cid:7408)कसी कंपनी (cid:7367)ारा, यथाि(cid:7021)थ ित, (cid:7408)कसी फम (cid:6981) के (cid:7408)कसी कंपनी म(cid:7286) संप(cid:7407)रवत(cid:6981)न या
कंपनी (cid:7367)ारा सांपाितक सम(cid:7004)ु थ ान के उ(cid:7004)त रािधकार (cid:7367)ारा होता ह,ै तब कंपनी (cid:7367)ारा शेयर(cid:7298) के िनग(cid:6981)म के िलए (cid:7079)ा(cid:7009)त रकम का
अवधारण िन(cid:7013) निलिखत सू(cid:7074) के अनसु ार (cid:7408)कया जाएगा—
(cid:7079)ा(cid:7009) त रकम = क-ख
ग
क = तुलन प(cid:7074) म(cid:7286) आि(cid:7021) तय(cid:7298) का बही मू(cid:7016) य, िजसे (cid:7090)ोत पर कटौती का सं(cid:7061)ह (cid:7408)कए गए संद(cid:7004)त कर क(cid:7409) रकम से कम (cid:7408)कया गया ह ै
या आय-कर अिधिनयम के अधीन दावा (cid:7408)कए गए कर क(cid:7409) रकम से कम क(cid:7409) गई रकम के (cid:7272)प म (cid:7286)अि(cid:7061)म का संदाय और कोई रकम
िजस ेतुलन-प(cid:7074) म (cid:7286) आि(cid:7021)त के (cid:7272)प म (cid:7286) उपद(cid:7414)शत (cid:7408)कया गया ह,ै िजसके अंतग(cid:6981)त आ(cid:7021)थ िगत (cid:7018)य य क(cid:7409) अवधारणा न क(cid:7409) गई रकम ह,ै
जो (cid:7408)कसी आि(cid:7021) त के मू(cid:7016) य को नह(cid:7277) दशात(cid:6981) ी ह ै।
(cid:7021)प(cid:7397)ीकरण – आि(cid:7021)तय(cid:7298) के बही मू(cid:7016)य का अवधारण करन ेके िलए आि(cid:7021)तय(cid:7298) के पुनमू(cid:6981)(cid:7016)यांकन के फल(cid:7021)व(cid:7272)प उनम(cid:7286) (cid:7408)कसी प(cid:7407)रवतन(cid:6981)
को गणना म(cid:7286) नह(cid:7277) िलया जाएगा ।
ख = तुलन प(cid:7074) म(cid:7286) उपद(cid:7414)शत दािय(cid:7004)व(cid:7298) का बही मू(cid:7016)य, (cid:7412)कत ुइसके अंतग(cid:6981)त िन(cid:7388)िलिखत रकम शािमल नह(cid:7277) ह,ै अथा(cid:6981)त् :-
(क)(cid:32)
फम (cid:6981)के, यथाि(cid:7021)थित, सांपाितक या भागीदार(cid:7298) क(cid:7409) पूंजी, चाह े(cid:7408)कसी भी नाम स े(cid:6980)ात हो ;
(ख)(cid:32)
आरि(cid:6979)ितयां और आिध(cid:6989)य चाह े(cid:7408)कसी भी नाम स े(cid:6980)ात ह(cid:7298), िजसके अंतग(cid:6981)त लाभ और हािन लखे े म (cid:7286)शेष ह ै;
(ग)(cid:32)
संद(cid:7275) कर क(cid:7409) रकम िजस े कटौती या सं(cid:7061)ह (cid:7408)कए गए संद(cid:7275) कर क(cid:7409) रकम स े कम (cid:7408)कया गया ह ै या आय कर
अिधिनयम के अधीन दावा (cid:7408)कए गए कर क(cid:7409) रकम स े कम क(cid:7409) गई रकम के (cid:7272)प म (cid:7286) अि(cid:7061)म कर संदाय और कोई
रकम िजस े तुलन प(cid:7074) आि(cid:7021)त के (cid:7272)प म (cid:7286) उपद(cid:7414)शत (cid:7408)कया गया ह ै िजसके अंतग(cid:6981)त आ(cid:7021)थिगत (cid:7390)य क(cid:7409) अपाकरण न
क(cid:7409) गई रकम ह ै जो (cid:7408)कसी आि(cid:7021)त के मू(cid:7016)य को नह(cid:7277) दशात(cid:6981) ी ह ै स े िभ(cid:7382), कोई रकम जो कराधान के िलए उपबंध
करता ह;ै
(घ)(cid:32)
(cid:7090)ोत पर कटौती या सं(cid:7061)हण या अि(cid:7061)म कर संदाय के (cid:7272)प म (cid:7286) सदं (cid:7004) त कर क(cid:7409) रकम, िजस े आय-कर अिधिनयम के
अधीन (cid:7079)ितदाय के (cid:7272)प म(cid:7286) दावा (cid:7408)कए गए कर क(cid:7409) रकम स े उसको लागू िविध के अनसु ार बही खाता लाभ को
िन(cid:7416)द(cid:7020) ट करते (cid:7263)ए संदये कर स े आिध(cid:6989)य प(cid:7407)रमाण तक घटा (cid:7408)दया गया हो, य(cid:7408)द कोई ह,ै से िभ(cid:7008)न कर के िलए
उपबंध को उपद(cid:7414)शत करने वाली कोई रकम ;
(ङ)(cid:32)
अिभिनि(cid:7391)त दािय(cid:7004)व(cid:7298) से िभ(cid:7382) दािय(cid:7004)व(cid:7298) को चुकान े के िलए (cid:7408)कए गए उपबंध को द(cid:7414)शत करने वाली कोई रकम ;
और
(च)(cid:32)
आकि(cid:7021)मक दािय(cid:7004)व(cid:7298) को द(cid:7414)शत करने वाली कोई रकम,
ग = संप(cid:7407)रवतन(cid:6981) या उ(cid:7275)रािधकार पर िनगम(cid:6981) (cid:7408)कए गए शेयर(cid:7298) क(cid:7409) स(cid:6990)ं या ।
(10) जहा ं शेयर(cid:7298) का िनग(cid:6981)म या आबंटन िबना (cid:7408)कसी (cid:7079)ितफल के कंपनी क(cid:7409) िव(cid:7378)मान शेयर धिृ त के आधार पर (cid:7408)कया
गया ह ैऐस ेशेयर(cid:7298) के संबंध म (cid:7286)(cid:7079)ितफल को “शू(cid:7008)य” समझा जाएगा ।
(11) जहा ं शेयर(cid:7298) का िनग(cid:6981)म अिधमानी शेयर(cid:7298) के या बांड या िडब(cid:7286)चर, िडब(cid:7286)चर-(cid:7021)टाक या (cid:7408)कसी (cid:7272)प म (cid:7286) िन(cid:6979)ेप
(cid:7079)माणप(cid:7074) या वारंट या कंपनी (cid:7367)ारा जारी (cid:7408)कसी अ(cid:7008)य (cid:7079)ितभिू त के संप(cid:7407)रवत(cid:6981)न पर (cid:7408)कया गया ह,ै इस (cid:7079)कार सपं (cid:7407)रव(cid:7414)तत (cid:7408)कसी
िवलेख के संबंध म (cid:7286)कंपनी (cid:7367)ारा (cid:7079)ा(cid:7385) रकम ।4 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
(12) जहा ं (cid:7059)य (cid:7367)ारा वापस िलए गए शेयर(cid:7298) को डीमैट (cid:7272)प म (cid:7286) धृत (cid:7408)कया जाता ह ै और उनक(cid:7409) सुिभ(cid:7382) (cid:7272)प स े पहचान
नह(cid:7277) क(cid:7409) जा सकती ह,ै ऐस े शये र के संबंध म (cid:7286) कंपनी (cid:7367)ारा (cid:7079)ा(cid:7385) रकम का अवधारण इस िनयम के अनसु ार पहले आओ पहले
पाओ िविध के आधार पर (cid:7408)कया जाएगा ।
(13) (cid:7408)कसी अ(cid:7008)य मामले म(cid:7286) शेयर के अ(cid:7408)ं कत मू(cid:7016)य को शेयर के िनग(cid:6981)म के िलए कंपनी (cid:7367)ारा (cid:7079)ा(cid:7385) रकम माना जाएगा ।’।
[अिधसूचना स.ं 94/2016[फा.सं.370133/30/2016-टीपीएल]
नीरज कुमार, अवर सिचव (कर नीित और िवधान)
(cid:7407)ट(cid:7009)पण : मूल िनयम भारत के राजप(cid:7074), असाधारण, भाग III, खंड 3, उपखंड (i) म(cid:7286) अिधसचू ना स.ं का.आ. 969(अ) तारीख
26 माच(cid:6981), 1962 (cid:7367)ारा (cid:7079)कािशत (cid:7408)कए गए थे और उनका अंितम संशोधन अिधसूचना सं. का.आ. 3179(अ) तारीख 7 अ(cid:7334)ूबर,
2016 (cid:7367)ारा (cid:7408)कया गया ।
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 17th October, 2016
INCOME-TAX
G.S.R. 982(E).—In exercise of the powers conferred by section 115QA read with section 295 of the
Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules
further to amend the Income-tax Rules, 1962, namely: -
1. (1) These rules may be called the Income-tax (28th Amendment), Rules, 2016.
(2) They shall come into force from the 1st June, 2016.
2. In the Income-tax Rules, 1962, after PART-VII B, the following part shall be inserted, namely: -
‘PART VII-BA
Special Provisions Relating to Tax on Distributed income of Domestic Company for Buy-Back of Shares
40BB. Amount received by the company in respect of issue of share. (1) For the purposes of clause (ii) of
the (cid:108)(cid:97)(cid:112)(cid:69)(cid:110)(cid:120)(cid:116)(cid:111)(cid:97)(cid:110)(cid:105) to sub-section (1) of section 115QA, the amount received by a company in respect of the
share issued by it, being the subject matter of buy-back referred to in the said section, shall be determined in
accordance with this rule.
(2) Where the share has been issued by a company to any person by way of subscription, amount
actually received by the company in respect of such share including any amount actually received by way of
premium shall be the amount received by the company for issue of such share.
(3) Where the company had at any time, prior to the buy-back of the share, returned any sum out of
the amount received in respect of such share the amount as reduced by the sum so returned shall be the
amount received by the company for issue of said share:
Provided that if the sum or any part of it so returned was chargeable to additional income- tax under section
115-O and the company has paid such additional income tax then such sum or part thereof, as the case may
be, shall not be reduced.
(4) Where the share has been issued by a company under any plan or scheme under which an
employees’ stock option has been granted or as part of sweat equity shares, the fair market value of the share
as computed in accordance with sub-rule (8) of rule 3, to the extent credited to the share capital and share
premium account by the company shall be deemed to be the amount received by the company for issue of said
share:¹Hkkx IIµ[k.M 3(i)º Hkkjr dk jkti=k % vlk/kj.k 5
(cid:120)(cid:116)(cid:105)(cid:97)(cid:69)(cid:45)(cid:108)(cid:97)(cid:112)(cid:110)(cid:46)(cid:111)(cid:110) For the purposes of this sub-rule the expression “sweat equity shares” shall have the meaning
assigned to it in clause (b) of the (cid:108)(cid:112)(cid:110)(cid:116)(cid:105)(cid:111)(cid:97)(cid:110)(cid:97)(cid:69)(cid:120) to sub-clause (vi) of clause (2) of section 17.
(5) Where the share has been issued by a company being an amalgamated company, under a scheme
of amalgamation, (cid:32)(cid:117)(cid:105)(cid:108)(cid:105)(cid:101)(cid:110) of the share or shares of an amalgamating company, then, the amount received by the
amalgamating company in respect of such share or shares determined in accordance with this rule, shall be
deemed to be the amount received by the amalgamated company in respect of the share so issued by it.
(6) The amount received by a company, being a resulting company in respect of shares issued by it
under a scheme of demerger, shall be the amount which bears the amount received by the demerged company
in respect of the original shares determined in accordance with this rule in the same proportion as the net book
value of the assets transferred in a demerger bears to the net worth of the demerged company immediately
before such demerger.
(7) The amount received by the demerged company in respect of the original shares in the demerged
company shall be deemed to have been reduced by the amount as so arrived under sub-rule (6).
(8) Where the share has been issued or allotted by the company as part of consideration for acquisition
of any asset or settlement of any liability then the amount received by the company for issue of such share
shall be determined in accordance with the following formula-
Amount received = A/B
Where,
A= an amount being lower of the following amounts-
(a)(cid:32) the amount which bears to the fair market value of the asset or the liability, as determined by a
merchant banker, the same proportion as the part of consideration being paid by issue of shares
bears the total consideration;
(b)(cid:32) the amount of consideration for acquisition of the asset or settlement of the liability to be paid in
the form of shares, to the extent credited to the share capital and share premium account by the
company;
B= the number of shares issued by the company as part of consideration:
(cid:112)(cid:105)(cid:97)(cid:110)(cid:108)(cid:97)(cid:69)(cid:46)(cid:110)(cid:120)(cid:116)(cid:111)(cid:45) For the purposes of this sub-rule, the term “merchant banker” shall have the meaning assigned
to in sub-clause(b) of clause (iv) of sub-rule (8) of rule 3.
(9) Where the shares have been issued or allotted by a company on succession or conversion, as the
case may be, of a firm into the company or succession of sole proprietary concern by the company, then the
amount received by the company for issue of shares shall be determined in accordance with the following
formula-
Amount received = A-B
C
A= book value of the assets in the balance-sheet as reduced by any amount of tax paid as deduction or
collection at source or as advance tax payment as reduced by the amount of tax claimed as refund under the
Income-tax Act and any amount shown in the balance-sheet as asset including the unamortized amount of
deferred expenditure which does not represent the value of any asset;
(cid:112)(cid:105)(cid:97)(cid:110)(cid:108)(cid:97)(cid:69)(cid:46)(cid:110)(cid:120)(cid:116)(cid:111)(cid:45) For determining book value of the assets, any change in the value of the assets consequent to
their revaluation shall be ignored.
B= book value of liabilities shown in the balance-sheet, but does not include the following amounts, namely:-
(a)(cid:32) capital, by whatever name called, of the proprietor or partners of the firm, as the case may be;
(b)(cid:32) reserves and surpluses, by whatever name called, including balance in profit and loss account;
(c)(cid:32) any amount representing provision for taxation, other than amount of tax paid, as deduction or
collection at source or as advance tax payment as reduced by the amount of tax claimed as refund6 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
under the Income-tax Act, if any, to the extent of the excess over the tax payable with reference
to the book profits in accordance with the law applicable thereto;
(d)(cid:32) any amount representing provisions made for meeting liabilities, other than ascertained liabilities;
and
(e)(cid:32) any amount representing contingent liabilities,
C= number of shares issued on conversion or succession.
(10) Where the share has been issued or allotted, without any consideration, on the basis of existing
shareholding in the company, the consideration in respect of such share shall be deemed to be “Nil”.
(11) Where the shares have been issued on conversion of preference shares or bond or debenture,
debenture-stock or deposit certificate in any form or warrants or any other security issued by the company, the
amount received by the company in respect of such instrument as so converted.
(12) Where the share being bought back is held in dematerialised form and the same cannot be
distinctly identified, the amount received by the company in respect of such share shall be the amount
received for the issue of share determined in accordance with this rule on the basis of the first-in-first-out
method.
(13) In any other case, the face value of the share shall be deemed to be the amount received by the
company for issue of the share.’.
[Notification No. 94 /2016 [F. No. 370133/30/2016-TPL]
NIRAJ KUMAR, Under Secy. (Tax Policy & Legislation)
Note : The principal rules were published in the Gazette of India Extraordinary, part III, section 3, sub-section
(i), (cid:101)(cid:105)(cid:100)(cid:118) notification number S.O. 969(E), dated the, 26th March, 1962 and were last amended vide notification
number S.O. 3179(E) dated the 7th October, 2016.
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.