On January 20, 2022 TPS Ltd. a domestic company purchases its own shares (face value ₹10 per share, amount offered to shareholders: ₹90 per share). Total amount distributed by TPS Ltd. on buy back of 30,000 share is ₹27,

(i) Income Tax Liability in the hand of Mr. X for Assessment year 2022-23: The income arising to the shareholders in respect of such buy back of shares by the domestic company would be exempt under section 10(34A) of the Income tax Act, 1961, where the company is liable to pay the additional income-tax on the buy-back of share. Hence Mr. X is not chargeable to Income tax in this transaction. Capital gain arising to him under the buy-back Scheme is exempt u/s 10(34A) of the Income tax Act, 1961. (ii) Income tax liability on TPS Ltd in the buy-back scheme for Assessment Year 2022-23: TPS Ltd. will have to pay additional income tax @ 23.296% (20% tax plus surcharge @ 12% plus health and education cess @ 4%) on buy-back of its share on distributed income u/s 115QA of the Income tax Act, 1961. Computation of additional income tax liability of TPS Ltd. for Assessment Year 2022-23 Particulars Amount (in Lakh) Amount paid to shareholders at the time of buyback (₹90 x 30,000) 27,00,000 Less: Amount received at the time of issue of shares in 2014-15 (₹25 x 30,000) (7,50,000) Distributed income 19,50,000 Tax on distributed income @ 20% 3,90,000 Add: Surcharge @ 12% 46,800 Add: Health and Education Cess @ 4% on (₹390000+ ₹46800) 17,472 Income tax liability of TPS Ltd. u/s 115QA 4,54,272 Round off 4,54,270