Buyback of shares v. addition under section 56(2)(x) 

Facts:

Assessee a share broker and clearing agent was subjected to search wherein it was found that they had bought back 2862500 shares @ Rs. 313.40 per share amounting to Rs. 89,71,07,500/-. The FMV of the shares as per rule 11UA was found to be Rs. 370.46. The difference was 57.06 per share was thus added back in the hands of the assessee under section 56(2)(x) to the tune of Rs. 16.33 crores. On appeal CIT(A) dropped the addition citing that buyback cannot be subject to addition under section 56(2)(x). On higher appeal by the revenue -

Held in favour of the assessee that buyback involves purchase of own shares and then a capital reduction of own shares and no acquisition of "property" as envisaged under section 56(2)(x) comes into possession of the assessee. The order of CIT(A) needs no interference.

Applied:

DCIT v. TPS Infrastructure Ltd. 2022 TaxPub(DT) 8279 (Del-Trib)

Vora Financial Services P. Ltd. v. ACIT 2018 TaxPub(DT) 4132 (Mum-Trib)

VITP Private Limited, Hyderabad v. Deputy Commissioner Of Income Tax, 2022 TaxPub(DT) 5344 (Hyd-Trib)

DCTT, v. Venture Lighting India Ltd. 2023 TaxPub(DT) 1568 (Chen-Trib)

we do not agree that on the issue of buy back of shares, assessee has acquired any share of any other company which would become property of the recipient
company. Actually it will be reduction in capital and nothing more.

Case: DCIT v. Globe Capital Market Ltd. 2023 TaxPub(DT) 6825 (Del-Trib)