Alfa Ltd., a domestic company purchased its own unlisted shares on 4th July, 2014. The consideration for buy-back amounting to ₹10.50 lakh was paid on the same day. The amount received by the company two years back for i

As per section 115QA of the Income Tax Act, 1961, 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. Further, such company shall be liable to pay additional income-tax at the rate of 20% on the distributed income. Thus, the contention of the Assessing Officer relating to taxability of the gains resulting from the buy back of shares is correct. Computation of Tax Payable by Alfa Ltd. Particulars Amount (in ₹) Consideration for Buy Back 10,50,000 Consideration received for issue of shares (6,50,000) Distributed Income 4,00,000 Additional Tax @ 20% 80,000 Surcharge @ 10%* 8,000 Cess & SHEC @ (2% + 1%) 2,640 Total Tax Payable 90,640 * Rate of surcharge applicable 10% The above tax should be paid on or before 18th July, 2014. However, it was paid on 29th September, 2014. Thus, for this delay interest is payable @ 1% per month for each month in whole or part. Therefore, interest is payable for 3 months. Interest = ₹(90,640 X 1/100 X 3) = ₹2,719.20 = ₹2,719