Buy-back under the 2025 Act: section 69, and taxing the company

This is Part 3 of a four-Part series on the taxation of a buy-back of shares, following Part 1 on extinguishment, section 115QA and who pays and Part 2 on the buy-back from 1 October 2024 to 31 March 2026, the dividend and the stranded loss, and preceding Part 4 on the dividend and capital reduction comparison, the SEBI route and the general anti-avoidance rule; it deals with the regime for a tax year beginning on or after 1 April 2026, and with the assessment that taxes the company on its own buy-back.

In Sanjana Cryogenic the company bought back 7,80,000 of its own shares at Rs 40 a share, the price at which they had been issued, and extinguished them. Three years later the assessment order valued those shares under rule 11UA at Rs 595.49 a share, treated the shortfall as a receipt of property below fair market value, and added Rs 43,32,82,200 to the company’s income from other sources. Nothing had come into the company. It had paid money out, cancelled the shares and reduced its own capital, and it was being taxed as though it had acquired an asset cheaply. In Globe Capital an addition of the same kind, Rs 16,33,34,250, was made on a buy-back on which, on the company’s own submission to the Court, the company-level charge had already been paid in full. Both additions were deleted, on the ground that a company which must destroy what it buys receives no property at all. The limits travel with the reasoning: Globe Capital is the only High Court decision on the question, it is an oral judgment, there is no decision of the Supreme Court, and the reasoning in both rests on the obligation to destroy what is bought back, so a Tribunal has remitted a case for the extinguishment itself to be verified. This Part ends on that reasoning and those limits.

The new law comes first, and it reverses the position in Part 2. For a buy-back in a tax year beginning on or after 1 April 2026 the buy-back limb of the dividend definition in the Income-tax Act, 2025 is omitted, and section 69 of that Act computes the shareholder’s gain as consideration received less cost of acquisition. The company-level charge of the first regime has no counterpart in the new Act and neither does the shareholder’s exemption. What is new is a layer that falls on one class of shareholder only: a promoter pays an additional income-tax on the same gain, with a surcharge that rides on that additional tax and cess above it, so two shareholders tendering into the same buy-back at the same price pay materially different amounts.

Between the two sits valuation. For unquoted shares the consideration actually paid may not be the figure on which the shareholder is taxed: section 79 of the 2025 Act substitutes a prescribed fair market value where the price is below it, and it does so one step inside the charge, at the computation provision to which section 69 is made subject. Section 79 is not mentioned in section 69, and part of the chain by which the prescribed figure arrives is construction of the sections with the rules rather than anything the rules state, so it is a point to be argued on the words, and the argument runs both ways. A buy-back of a private company’s shares priced at or near book value is exactly the case in which it matters, and the valuation is done before the price is fixed.

Key points

• The buy-back limb of the dividend definition has gone, for a tax year beginning on or after 1 April 2026. Sub-clause (f) of section 2(40) of the Income-tax Act, 2025 was omitted with effect from 1 April 2026, and the cross-reference in section 7(2)(a), which fixes when a dividend is included in income, was pulled back from sub-clause (f) to sub-clause (e) at the same time. Section 69 puts the shareholder back on an ordinary capital gains computation of consideration less cost, and the 2025 Act carries no counterpart to the company’s own charge under section 115QA of the 1961 Act and none to the exemption in section 10(34A). The matched pair that defined the first regime is gone in both halves.
• A promoter carries a second layer and a non-promoter does not. Section 69(2) imposes an additional income-tax on a promoter’s gain at the rates in its Table, two per cent and 9.5 per cent on short-term and long-term gains for a domestic company promoter and ten per cent and 17.5 per cent for any other, applied to the gain and not to the tax on it. The twelve per cent surcharge in section 3(6) of the Finance Act, 2026 then rides on that additional income-tax alone, with no threshold and no marginal relief, and the four per cent Health and Education Cess under section 3(16) applies to that additional tax as increased by the surcharge. The stacked effect of those three layers is computed below.
• Which version of rule 11UA governs an earlier year decides the figure, and both limbs of the commencement clause have to be quoted. Notification No. 61/2017 substituted the unquoted-equity-share formula in rule 11UA(1)(c)(b) and provides that the amendment “shall come into force from the 1st day of April, 2018 and shall apply in relation to assessment year 2018-19 and subsequent years”. Since rule 11UA values as at the valuation date, coming into force on 1 April 2018 would of itself reach only financial year 2018-19 receipts; it is the second limb that pulls the substituted formula back onto financial year 2017-18 receipts. That tension is a live argument for an assessee and it matters in money, because the substituted hybrid formula brings immovable property in at stamp duty value and can produce the higher figure.
• On an earlier year, governed by the Income-tax Act, 1961 and the Income-tax Rules, 1962, the measure on an unquoted preference share is a different sub-clause altogether. Rule 11UA(1)(c)(c), which governs the fair market value of unquoted shares and securities other than equity shares in a company which are not listed in any recognised stock exchange, takes the price the instrument would fetch in the open market, with a merchant banker’s or accountant’s report expressly contemplated, not the adjusted net asset formula, so a reply that attacks the book-value computation is answering the wrong sub-clause.
• Promoter status for an unlisted company is decided by arithmetic as much as by designation, because section 69(3)(b) is disjunctive and a holder of more than ten per cent who has never been named a promoter in any filing is inside it. And the words requiring the purchase to be in accordance with section 68 of the Companies Act, 2013 sit in section 69(2), not in section 69(1), so a non-compliant purchase still produces a gain in the shareholder’s hands while, on the face of sub-section (2), the promoter’s additional tax does not attach to it. The Revenue’s answer is that the formula describes the transaction Parliament had in mind rather than imposing a condition, so the point is open.
• Whether a promoter’s short-term gain on unquoted shares is inside the Table at all is open on its words, because Sl. No. 1 does not say “short-term capital gains” but short-term capital gains referred to in a named charging section, and such a gain is not charged under that section. The Revenue’s answer is that column B describes a character of gain and that the narrow reading leaves the short-term row with almost no work in the unlisted company for which the promoter test is written. The firm’s view is that the gain falls outside column B, so the position is taken in the return rather than conceded and disputed later.
• On unquoted shares, section 79 can displace the price, and the mechanism is not spelt out in one place. The substitution operates for the purposes of section 72, the computation provision to which section 69(1) is expressly made subject, and serial numbers 4 and 5 of rule 57 of the Income-tax Rules, 2026, the unquoted-share entries, are the only entries of that rule expressed to serve section 72. But column B of rule 57 never names section 79: reading the prescribed figure as arriving in the section 69 computation through section 72 is the coherent construction of rules 56 and 57 with sections 69, 72 and 79, and not something either rule states, so it is argued and not asserted. Whether the shareholder falls within the class of persons prescribed under section 79(2), which is rule 58 of those Rules, is a question on that rule’s own terms.
• An addition in the company’s own hands on its own buy-back is a real and separate exposure, and it has twice been answered on the same ground. Both forums held that the company receives no property, because the shares it buys back it is obliged under section 68(7) of the Companies Act, 2013 to extinguish and destroy, so receipt and extinguishment cannot be severed. Globe Capital is the only High Court decision on the question, it is an oral judgment, and it binds within the Delhi jurisdiction and is persuasive elsewhere; there is no decision of the Supreme Court. Both decisions are on section 56(2)(x) of the 1961 Act, and for a tax year governed by the Income-tax Act, 2025 the charge is section 92(2)(m)(iii)(B) of that Act, on whose words the same argument has to be made again.
• One paragraph of Globe Capital is routinely read as its opposite. At paragraph 29 the Court accepted the Revenue’s contention that the Tribunal’s reliance on a Hyderabad Bench decision was misplaced, the provision there being section 56(2)(viia) and not section 56(2)(x), and treated that reliance as only incidental. The judgment is not an endorsement of that decision, and citing it as one cites it for the one thing it declines to say.
• What a CFO may be told is settled is not. The Mumbai Tribunal in Sanjana Cryogenic expressly declined to pronounce on the wider proposition that a rejection of the general anti-avoidance rule by an Approving Panel excludes every other provision, and repeated in its summary that it had not proceeded on it; in the same order it held it unnecessary to decide whether section 115QA is an exhaustive and exclusive code that section 56(2)(x) can never operate alongside. Neither refusal is a holding either way.
• The line carries a qualification to note and a qualification to act on. A Chennai Bench in Updater Services set aside and remitted a buy-back addition together with the section 115QA levy, expressly expressing no opinion on the merits, which shows the issue still being contested at the assessment stage. The one to act on is TPS Infrastructure, where the Tribunal accepted the legal position but restored the matter to verify that the shares had in fact been extinguished by reduction of paid-up capital. Extinguishment has to be provable years later: the register under section 68(9) of the Companies Act, 2013 with both its dates, the return filed with the Registrar, the capital redemption reserve entry and the movement in paid-up capital between two balance sheets.
• A reply built on the older authority needs translating before it is used. Under section 56(2)(viia) there were two independent grounds, that the shares did not become the recipient’s property and that they were not shares of any other company; only the first survives into clause (x), whose definition of property drops the “other company” qualifier. The surviving ground is extinguishment.

Regime three: the 2025 Act and the Finance Act 2026 reversal

The third regime is made in a different statute from the first two, and that is the first thing to get right. The Finance Act, 2026 (No. 4 of 2026) received the assent of the President on 30 March 2026. Its section 1 reads:

“1. (1) This Act may be called the Finance Act, 2026. (2) Save as otherwise provided in this Act,— (a) sections 2 to 129, clause (b) of section 152 and section 156 shall come into force on the 1st day of April, 2026; (b) sections 153 to 155 shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.”

Every direct-tax provision of that Act sits inside sections 2 to 129, so the direct-tax amendments operate from 1 April 2026, for tax year 2026-27 onwards. The buy-back amendments are made to the Income-tax Act, 2025. None of sections 2(22)(f), 46A, 115QA, 10(34A), 56(2)(x), 94(8) or 195 of the 1961 Act is touched, so nothing here disturbs the position for a buy-back between 1 October 2024 and 31 March 2026.

Buy-back comes out of “dividend”

Section 2(40) of the 2025 Act defines “dividend”. Its sub-clause (f), the counterpart of section 2(22)(f) of the 1961 Act, now prints as an omitted slot, “(f) 2[***]”, and the Department’s consolidated print of the Act as amended carries this footnote to it:

“2. Omitted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to its omission, sub-clause (f) read as under : ‘(f) any payment by a company on purchase of its own shares from a shareholder as per section 68 of the Companies Act, 2013 (18 of 2013),’”

Nothing has been renumbered and sub-clauses (a) to (e) are untouched, which matters because clause (40)(d), the deemed dividend on a reduction of capital, remains in force and unamended. The consequential amendment is in section 7, “Income deemed to be received and dividend deemed to be income in a tax year”. Section 7(2)(a) now reaches “any dividend declared by a company or distributed or paid by it within the meaning of section 2(40)(a) to (e)”, and the footnote on the “(e)” reads: “Substituted for “(f)” by the Finance Act, 2026, w.e.f. 1-4-2026.” The range was closed from “(a) to (f)” down to “(a) to (e)”, so the timing rule no longer reaches the omitted limb. The deeming and its machinery are withdrawn together, from the same date.

The charge on the shareholder

Section 69 of the Income-tax Act, 2025 is headed “Capital gains on purchase by company of its own shares or other specified securities” and is the counterpart of section 46A of the 1961 Act. Sub-section (1) is unamended:

“69. (1) If a shareholder or a holder of other specified securities receives any consideration from any company for the purchase of its own shares or other specified securities held by such shareholder or holder of other specified securities, then, subject to the provisions of section 72, the difference between the cost of acquisition and the value of consideration so received shall be deemed to be the “Capital gains” arising to such shareholder or the holder of other specified securities, as the case may be, in the year in which the company purchases the shares or other specified securities.”

Sub-sections (2) and (3) were substituted by the Finance Act, 2026. The Notes on Clauses to clause 34 of the Finance Bill, 2026 record that the substitution takes effect from 1 April 2026 and applies in relation to tax year 2026-2027 and subsequent years. As the section now stands:

“(2) In respect of capital gains referred to in sub-section (1), where a company purchases its own shares or other specified securities in accordance with the provisions of section 68 of the Companies Act, 2013 (18 of 2013) and the shareholder or holder of other specified securities is a promoter, the aggregate income-tax payable on such capital gains shall be— (a) the income-tax payable on such capital gains in accordance with the provisions of this Act; and (b) an additional income-tax in respect of capital gains specified in column B of the Table below, computed at the rate specified in column C or column D of the said Table:

TABLE

Sl. No.	Income	Rate, where the promoter is a domestic company	Rate, where the promoter is other than a domestic company
A	B	C	D
1.	Short-term capital gains referred to in section 196 arising from the transfer of such securities.	2%	10%
2.	Long-term capital gains referred to in section 197 or section 198 arising from the transfer of such securities.	9.5%	17.5%

(3) For the purposes of this section,— (a) in the case of a company whose shares are listed on a recognised stock exchange in India, ‘promoter’ shall have the same meaning as assigned to it in regulation 2(k) of the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); (b) in any other case, “promoter” means,–– (i) a “promoter” as defined in section 2(69) of the Companies Act, 2013 (18 of 2013); or (ii) a person who holds, directly or indirectly, more than 10% of the shareholding in the company; (c) “specified securities” shall have the same meaning as assigned to it in Explanation 1 to section 68 of the Companies Act, 2013 (18 of 2013).”

Four things in that text decide most files. First, the condition that the purchase be “in accordance with the provisions of section 68 of the Companies Act, 2013” governs sub-section (2) only. Sub-section (1) deems capital gains on any purchase by a company of its own shares, compliant or not, so a non-compliant purchase still produces a gain in the shareholder’s hands while, on the face of sub-section (2), the promoter’s additional income-tax does not attach to it. That is the reading of the words, and the Revenue’s answer is the one it makes on the identically keyed words in section 2(22)(f) of the 1961 Act: the formula describes the transaction Parliament had in mind rather than imposing a condition, and a promoter cannot escape a layer of tax enacted for him by establishing that his own company failed a company-law condition. The point is open, and it is the more striking because the keying appears in sub-section (2) and not in sub-section (1), which is itself the assessee’s best textual answer.

Second, the definition of promoter is split by listing status and, for an unlisted company, is disjunctive: a person is a promoter if he answers section 2(69) of the Companies Act, 2013 or if he holds, directly or indirectly, more than ten per cent of the shareholding. A financial investor holding more than ten per cent of a private company, never named a promoter in any filing and likely to resist the label, is a promoter for section 69(2) on the arithmetic of his holding alone.

Third, the rates in columns C and D apply to the capital gains, not to the tax on them. Column B is headed “Income”.

Fourth, the Table identifies the gains it reaches by reference to the charging sections: short-term gains “referred to in section 196”, long-term gains “referred to in section 197 or section 198”. Section 196 charges short-term capital gains in certain cases at twenty per cent and is directed at securities on which securities transaction tax has been paid; sections 197 and 198 charge long-term capital gains at twelve and a half per cent, section 198 applying above a threshold of Rs 1,25,000. A promoter’s short-term gain on unquoted shares is not charged under section 196 but at the rates otherwise applicable to him, so whether such a gain is in column B at all is a live question on the words of the Table. The Revenue’s answer is that column B is headed “Income” and so describes a character of gain; that Sl. No. 2 reaches long-term gains by naming both of the sections that charge them, which shows the Table meaning to cover a type of gain rather than a species of security; and that on the narrow reading the short-term row does almost nothing in the unlisted company for which the promoter test in section 69(3)(b) is written. The question is taken up below.

The surcharge, and what it rides on

The twelve per cent surcharge is not in the Income-tax Act and not in the First Schedule. It is in section 3(6) of the Finance Act, 2026:

“In cases in which tax has to be charged and paid under section 69 or section 170(5) or section 352 of the said Act, the tax shall be charged and paid at the rates as specified in those sections and shall be increased by a surcharge, for the purposes of the Union, calculated at the rate of 12% of such tax.”

“The said Act” in section 3 is the Income-tax Act, 2025, by the definition in section 3(1). This is not a buy-back surcharge: it covers tax charged under sections 170(5) and 352 of the 2025 Act as well, which are different charges. And the only tax “charged and paid under section 69” is the additional income-tax imposed by section 69(2)(b) on a promoter, the ordinary tax on the gains being charged by sections 196, 197 and 198. The twelve per cent therefore rides on the promoter’s additional income-tax alone, and a non-promoter attracts neither the additional income-tax nor this surcharge. There is no threshold in section 3(6) and no marginal relief: the formula in section 3(5) opens “For the purposes of sub-section (4),” and does not reach sub-section (6). Health and Education Cess then applies: section 3(16) increases “the amount of income-tax as specified in sub-sections (6) to (14) and as increased by the applicable surcharge” by an additional surcharge “calculated at the rate of 4% of such income-tax and surcharge”. Sub-section (6) is inside that range and is not among the exclusions in section 3(17), which are confined to certain deduction and collection cases and to specified funds.

The order of operations is the whole of the arithmetic. A promoter who is an individual, not a domestic company, tenders 2,00,000 unquoted shares into a buy-back on 1 June 2026 at Rs 100 per share, having acquired them at Rs 50. The holding is long term and the gain is charged under section 197. Assume also that the price of Rs 100 a share is not below the fair market value prescribed for such a share through rule 57 of the Income-tax Rules, 2026, so that no question of substitution under section 79 arises on these figures; whether section 79 reaches a buy-back at all is question 14.

Step	Amount
Consideration received, 2,00,000 shares at Rs 100	Rs 2,00,00,000
Less cost of acquisition, 2,00,000 shares at Rs 50	Rs 1,00,00,000
Capital gains under section 69(1)	Rs 1,00,00,000
Ordinary tax under section 197 at 12.5 per cent	Rs 12,50,000
Additional income-tax, section 69(2)(b), Sl. No. 2, column D, 17.5 per cent of the gain	Rs 17,50,000
Surcharge at 12 per cent of that additional income-tax, Finance Act 2026 section 3(6)	Rs 2,10,000
Additional income-tax plus surcharge	Rs 19,60,000
Cess at 4 per cent of that sum, Finance Act 2026 section 3(16)	Rs 78,400
The additional layer, in total	Rs 20,38,400

The additional layer is 20.384 per cent of the gain, on top of the ordinary tax and whatever surcharge and cess that ordinary tax attracts in his own hands. Had the promoter been a domestic company, column C applies at 9.5 per cent: Rs 9,50,000 of additional tax, Rs 1,14,000 of surcharge and Rs 42,560 of cess, Rs 11,06,560 in all, or 11.0656 per cent of the gain. A shareholder on the same facts who is not a promoter pays the ordinary tax on the same Rs 1,00,00,000 and nothing more. That spread between two shareholders in the same buy-back, at the same price, on the same gain, is the point of the 2026 amendment.

The architectural marker

Section 69 sits in Chapter IV of the 2025 Act, “Computation of Total Income”. It is not in Chapter XIII, “Determination of tax in special cases”, sections 190 to 235, which is where the new Act keeps its special charges and special rates. Section 115QA sat in Chapter XII-DA of the 1961 Act, a chapter of special charges on the company. The move from a special-charge chapter to the computation chapter is the drafting signature of a charge taken off the company and put on the shareholder, computed inside his own total income rather than levied on a distribution at the company’s end. No fourteen-day payment obligation on the company follows, no company-level interest provision, no bar on credit, and no company-level charge on a buy-back anywhere in the chapter where the 2025 Act keeps its special charges.

The negative that matters

The 2025 Act has no counterpart to section 115QA and none to section 10(34A). On the charging side, Chapter XIII runs from section 190 to section 235, with section 189 in Chapter XII and section 236 in Chapter XIV, so its boundaries are fixed. Nothing in it charges a company on a buy-back, on distributed income or on distributed profits; its only company-level charges, sections 199, 200, 204 and 206, fall on the company’s own total income or book profit. The Department’s navigator mapping the 1961 Act to the new Act carries the point further: it marks sections 115-O, 115P, 115Q, 115QA, 115QB, 115QC and 115R “Redundant”, with no successor section against any of them, and the only buy-back row in its table is section 46A, mapped to section 69. That navigator is the Department’s own mapping document, not the enacted Act: it is a Bill-stage document whose third column gives the section number as per the latest draft, and it is used here for the 1961-to-2025 concordance and not as the enacted numbering. On the exemption side, the 2025 Act has no long section 10: its exemptions live in Chapter III, “Incomes Which Do Not Form Part of Total Income”, sections 11 and 12, with the operative lists in Schedules II to VIII. Section 10(34A) has no successor anywhere in the new Act, and no exemption for a receipt on a buy-back appears in those provisions. The matched pair that defined regime one, a charge on the company and an exemption in the shareholder’s hands, is gone in both halves.

For a buy-back in a tax year beginning on or after 1 April 2026 the whole of the tax happens in the shareholder’s computation. What is left at the company’s end is withholding where the tendering shareholder is a non-resident, under section 393(2) of the 2025 Act, Table Sl. No. 17, on “any other sum chargeable under the provisions of this Act”, and the accuracy of what it reports. The hook that reached a resident shareholder’s receipt in the previous regime, section 194 of the 1961 Act, caught it because the receipt was a dividend within section 2(22)(f), and that characterisation has gone. A non-resident’s gain is charged under the same section and computed under the same computation provision as a resident’s. The rate-of-exchange rule in rule 52 of the Income-tax Rules, 2026, the counterpart of rule 115A of the 1962 Rules, is headed as the rate of exchange for conversion of rupees into foreign currency and reconversion of foreign currency into rupees for the purpose of computation of capital gains under section 72, which is confirmation on the face of the Rules that the section 72 computation carries a foreign-currency limb.

The unquoted-share trap in regime three

An ordinary capital gains computation on the consideration actually paid describes regime three for a listed company. For a private company it can be wrong. Section 79 of the Income-tax Act, 2025, headed “Special provision for full value of consideration for transfer of share other than quoted share”, sits in the same Chapter IV as section 69:

“79. (1) If the consideration received or accruing from the transfer of a capital asset, being share of a company other than a quoted share, is less than the fair market value of such share determined in the manner as may be prescribed, the value so determined shall be deemed to be the full value of consideration received or accruing as a result of such transfer for the purposes of section 72.

(2) The provisions of sub-section (1) shall not apply to any consideration received or accruing as a result of transfer by such class of persons and subject to such conditions, as may be prescribed.

(3) For the purposes of this section, the expression “quoted share” means the share quoted on any recognised stock exchange with regularity from time to time, where the quotation of such share is based on current transaction made in the ordinary course of business.”

The mechanism runs through section 72, the capital gains computation provision of the 2025 Act and the counterpart of section 48 of the 1961 Act. Section 69(1) computes the gain as consideration received less cost of acquisition, expressly “subject to the provisions of section 72”, and section 79(1) substitutes a prescribed fair market value as the full value of consideration “for the purposes of section 72”. Section 79 does not amend section 69 and is not mentioned in it; it operates one step further in, at the computation to which the section 69 charge is made subject. A CFO reading section 69 alone will not see it coming, and it bites hardest where the price was set at or below book value.

The valuation machinery is in the Income-tax Rules, 2026, notified by G.S.R. 198(E) of 20 March 2026 under section 533 of the 2025 Act with effect from 1 April 2026. Rule 57, “Determination of fair market value”, is the counterpart of rules 11UA, 11UAA and 11UAB of the 1962 Rules. It is a table keyed to the nature of the property, and the sections it serves are stated per serial number in column B, not once for the rule as a whole. Serial numbers 1, 2 and 3, jewellery, artistic work and quoted shares and securities, serve sections 26(2)(j) and 92. Serial numbers 6 and 7, immovable property and residual property, serve section 26(2)(j) alone. Only serial numbers 4 and 5, unquoted equity shares and unquoted shares and securities other than equity shares which are not listed, are expressed to serve section 72 as well. The only entries in the rule expressed to feed the capital gains computation are therefore the two unquoted-share entries, which are the entries a private-company buy-back engages.

For unquoted equity shares, serial number 4 carries the same adjusted net asset value formula as rule 11UA(1)(c)(b) of the 1962 Rules, fair market value being (A + B + C + D minus L) multiplied by PV over PE: assets other than jewellery, artistic work, shares, securities and immovable property at book value, reduced by income-tax paid net of any refund claimed and by any amount carried as an asset that does not represent the value of any asset, including unamortised deferred expenditure; jewellery and artistic work at registered-valuer open-market price; other shares and securities at fair market value under the same rule; immovable property at stamp duty value; less liabilities at book value with six exclusions, of which the most consequential is “reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation”. There is no merchant-banker and no discounted cash flow option in that entry. A company carrying appreciated land at cost will see it enter the formula at stamp duty value, a company carrying accumulated losses cannot treat them as a liability, and a reserve set apart towards depreciation is not among the exclusions, so it stays in L and reduces the value.

The valuation date comes from rule 56, “Meaning of expressions used in determination of fair market value”, the counterpart of rule 11U of the 1962 Rules. The table under its clause (i) has three rows: for section 92, the date on which the assessee receives the property or the consideration; for section 79, the date on which a capital asset being a share of a company other than a quoted share is transferred; for section 26(2)(j), the date on which inventory is converted into, or treated as, a capital asset. Section 72 is not one of the three, so on a buy-back of unquoted shares the operative date is the section 79 date, the date of transfer.

Part of this has to be stated as construction and not as text. Rule 57’s column B never mentions section 79. The reading that makes the provisions work together is that section 79 does its work by substituting a value for the purposes of section 72, so the figure it imports is the serial 4 or serial 5 figure reached through section 72, while rule 56(i) supplies the date at which that figure is struck in a section 79 case. That is a reading of the two rules with the two sections; neither rule says it, and a submission asserting that rule 57 prescribes the fair market value “for section 79” asserts something the rule does not say. Section 69 itself appears in no entry of rule 57, which is consistent: section 69(1) computes on the “consideration so received”, and any substitution of fair market value has to arrive through section 72.

The exemption power in section 79(2) has been exercised

The provision is rule 58 of the Income-tax Rules, 2026, headed “Prescribed class of persons for the purpose of section 92(3)(i) and section 79 of the Act”. On the Department’s navigator for the 2026 Rules, rule 58 is the consolidated successor of two rules of the 1962 Rules, rule 11UAC and rule 11UAD. Rule 11UAC served section 56(2)(x) and rule 11UAD served section 50CA, two different provisions with two different exempt classes, and rule 58 now serves both section 92(3)(i) and section 79. Whether a shareholder tendering unquoted shares into a buy-back falls inside the prescribed class is a question on the terms of rule 58 itself, applied to his facts, and it is the first thing to check on a file, because relief under section 79(2) removes the problem altogether for the persons it covers.

Whether section 79 can apply where the “transfer” is a buy-back is open on the face of the sections. The shareholder’s side of a buy-back is a transfer by him and section 69(1) deems capital gains to arise to him, so the extinguishment reasoning that answers a charge in the company’s hands does not obviously answer a deeming provision aimed at the transferor. Against that, section 79 speaks of “the transfer of a capital asset, being share of a company”, and what the shareholder parts with is an asset that ceases to exist on the other side of the transaction rather than passing to a holder who can enjoy it. Also open is whether a price fixed under section 68 of the Companies Act, 2013 is open to substitution under section 79 at all, when the charge in section 69(2) is itself keyed to compliance with that section and the company law machinery fixes the price by resolution and offer. Neither question is answered by section 69 or by section 79, and both are argued on the words.

The same mechanism works in reverse on a loss. Where the buy-back price is below cost, so that section 69(1) would otherwise produce a capital loss, a prescribed fair market value above the price reduces that loss, removes it, or turns it into a gain carrying the promoter layer. A shareholder exiting an unquoted company at a loss therefore has the same valuation to do as one exiting at a gain.

Can the company be taxed on its own buy-back? Section 56(2)(x) and the two decisions

Everything so far has concerned the shareholder, or the company as the person liable under section 115QA. There is a separate line of assessment, and in money terms it is often the largest exposure in the file: an addition in the company’s own hands, on its own buy-back, under section 56(2)(x) of the 1961 Act.

The Revenue’s argument, at its strongest

Clause (x) was inserted by section 29(III) of the Finance Act, 2017 (Act 7 of 2017, assented on 31 March 2017) with effect from 1 April 2017, and operates on receipts “on or after the 1st day of April, 2017”, that is from assessment year 2018-19. It charges, under “Income from other sources”, a receipt by any person of property other than immovable property “for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees”, the income being “the aggregate fair market value of such property as exceeds such consideration”. “Property” is defined by the Explanation to the clause, which takes clause (d) of the Explanation to clause (vii): a closed list of capital assets of the assessee, item (ii) of which is “shares and securities”. Fair market value of property other than immovable property “means the value determined in accordance with the method as may be prescribed”, the hook on which rule 11UA of the Income-tax Rules, 1962 hangs.

Run against a buy-back the argument assembles itself. The company receives shares; shares are property; the buy-back price is below the rule 11UA value; the excess is the company’s income from other sources. Clause (x) applies to any person and its definition of property draws no distinction between the shares of another company and the company’s own shares, unlike the clause it replaced. The exclusions in the first proviso are a closed list keyed to the identity of the payer or to a listed section 47 transaction, and none mentions a buy-back. Section 115QA is a charge on distributed income in a different chapter and does not by its terms exclude clause (x). And the taxable event is the receipt: the extinguishment that follows under company law is a later event that cannot undo a receipt which has already happened. That is not a straw argument. It was pressed by senior standing counsel in the High Court and by the Commissioner departmental representative in the Tribunal in the two decisions below, and it has to be answered on the ingredients of the clause.

The Delhi High Court: Globe Capital

Pr. Commissioner of Income Tax, Central - II, New Delhi v. M/s Globe Capital Market Ltd., ITA 364/2024, decided on 7 April 2026 by a Division Bench of the High Court of Delhi, Dinesh Mehta and Vinod Kumar JJ, judgment per Dinesh Mehta J and marked “(Oral)”, carried on its face as “REPORTABLE”, reported at [2026] 185 taxmann.com 513 (Del.).

The facts are those of an ordinary, well-documented buy-back. In assessment year 2018-19 the company bought back 28,62,500 equity shares at Rs 313.40 per share, Rs 89,71,07,500 in all. The Assessing Officer took the rule 11UA value at Rs 370.46, treated the difference of Rs 57.06 per share as the company’s income, and added Rs 16,33,34,250 under clause (x) by an assessment under sections 153A and 143(3) dated 15 July 2021 determining total income at Rs 1,26,96,35,850. On the same buy-back, the assessee company’s submission as reproduced in the judgment records that Rs 20,69,80,642 had already been paid under section 115QA on a distributed income of Rs 89,71,07,500 computed under rule 40BB, the amount received by the company for the issue of those shares being nil because they had been issued as bonus shares. So the Revenue’s case was an addition in the company’s hands on a buy-back which, on that submission, had already borne the company-level charge in full. The Commissioner (Appeals) deleted the addition on 30 January 2023, and the Tribunal, Delhi Bench “F”, dismissed the Revenue’s appeal in ITA No. 967/Del/2023 on 25 September 2023.

The rate in that working corroborates the arithmetic in Part 1. Rs 20,69,80,642 is 23.072 per cent of Rs 89,71,07,500, which is the financial year 2017-18 stack of twenty per cent under section 115QA, a twelve per cent surcharge on that tax and a two plus one per cent cess on the two; the order prints the rate rounded to 23.07 per cent. On that working the company paid at 23.072 per cent on a financial year 2017-18 buy-back, and not at the widely quoted 23.296 per cent, which assumes a four per cent cess.

The High Court dismissed the Revenue’s appeal, starting from corporate capacity. Section 67(1) of the Companies Act, 2013 denies a company the power to buy its own shares unless the consequent reduction of capital is effected under that Act, and section 68 is what lifts that bar; the Court reasoned from section 68 and did not refer to section 67(1). At paragraph 24:

“But for Section 68 of Companies Act and the procedure provided thereunder, there is no way can a company buy its own shares. Because buying of own shares is otherwise alien to concept of corporate entity and the provisions of the Companies Act. Securities or shares of a Company can, in a given case be a property in the hands of a Corporate entity but for the issuing company, it is a certificate issued to its members in lieu of the contribution they have made towards the capital or for subscribing to the shares. Buy-back of shares essentially means reduction of capital of the company, which otherwise is impermissible, if recourse to Section 68 of the Companies Act is not taken.”

At paragraph 26: “section 68 of the Companies Act in so many words expresses that the buy-back of share is reduction of the share capital.” Then the holding, at paragraph 27:

“A person cannot be taxed for so-called deemed profit from the property (shares) which accrues to it consequent to destruction of the very same property. Because, once the shares are bought back, the purported property extinguishes or vanishes. Hence, the very hypothesis that the respondent-company had acquired an asset at lesser rate than the fair market value has no legs to stand on. Buy-back of its own shares is antitheses to buying an asset.”

At paragraph 28 the Court dealt with the attractiveness of the Revenue’s reading: “The interpretation which Mr. Agrawal seeks to give to Section 56(2)(x) of the Act of 1961 at first blush appears to be attractive, but if the same is tested on the anvil of principles of Companies Act, common prudence and provisions of Income Tax Act, the same turns out to be holding no water.” At paragraph 30: “The view which the AO had taken in treating the buy-back of shares of the company to be a transaction leading to generation of profit/deemed profit is clearly flawed and untenable in the eye of law.” At paragraph 31: “The appeal therefore, fails.”

One passage must not be read as its own opposite. At paragraph 29 the Court accepted the Revenue’s criticism of the Tribunal’s reliance on a decision of the Hyderabad Bench:

“We however, accept the contention of Mr. Agrawal that the Tribunal’s reliance upon judgment of its Hyderabad Bench was misplaced, because the applicable provisions therein was Section 56(2)(viia) and not Section 56(2)(x) of the Act of 1961, which the AO has resorted to in the extant case.

Be that as it may, the Tribunal’s reliance upon its Hyderabad Bench decision is only incidental. Otherwise the Tribunal has deliberated upon the issue and affirmed the well-reasoned order of the CIT(A).”

The High Court did not approve that decision. It held the reliance on it misplaced, treated the point as incidental to the result, and reached its own conclusion on clause (x) by the extinguishment route. Anyone citing Globe Capital as High Court endorsement of the clause (viia) line is citing it for the one thing it declines to say.

A valuation point the facts carry with them

The addition was computed under rule 11UA for assessment year 2018-19, and which version of the rule governs that year has a trap in it. The unquoted-equity-share formula in rule 11UA(1)(c)(b) was substituted by Notification No. 61/2017, G.S.R. 865(E), F. No. 149/136/2014-TPL, dated 12 July 2017, the Income-tax (20th Amendment), Rules, 2017, which operated on “rule 11UA, sub-rule (1), in clause (c), for sub-clause(b)” and touched nothing else. Its commencement clause reads: “They shall come into force from the 1st day of April, 2018 and shall apply in relation to assessment year 2018-19 and subsequent years.” Both limbs must be quoted together. Rule 11UA values the property as at the valuation date, the date of receipt, so a rule merely coming into force on 1 April 2018 would bite on receipts in financial year 2018-19, that is assessment year 2019-20. It is the second limb, the express application in relation to assessment year 2018-19, that pulls the substituted formula back onto financial year 2017-18 receipts. Quoting the first limb alone supports the opposite conclusion; quoting the second alone leaves the apparent retrospectivity unexplained. The tension between them is a live argument for an assessee rather than a settled point, and it matters in money: the substituted hybrid formula can produce a higher value than the pure book-value formula it replaced, because it brings immovable property in at stamp duty value and jewellery and artistic work in at registered-valuer value instead of book value.

Which sub-clause of rule 11UA governs also depends on what was bought back. The formula is in rule 11UA(1)(c)(b) and it is confined to unquoted equity shares. The fair market value of unquoted shares and securities other than equity shares which are not listed is governed by rule 11UA(1)(c)(c), under which it “shall be estimated to be price it would fetch if sold in the open market on the valuation date and the assessee may obtain a report from a merchant banker or an accountant in respect of such valuation”. On a buy-back of unquoted preference shares the measure is therefore open-market price and not adjusted net assets, a merchant banker or accountant report is expressly contemplated, and a reply that attacks the book-value formula is answering the wrong sub-clause.

The Mumbai Tribunal: Sanjana Cryogenic

DCIT CC-8(3), Mumbai v. Sanjana Cryogenic Storages Ltd., Mumbai, ITA No. 2503/Mum/2026, assessment year 2022-23, ITAT Mumbai Bench “F”, Amit Shukla JM and Arun Khodpia AM, heard on 3 August 2026 and pronounced on 31 August 2026. The addition was Rs 43,32,82,200 under clause (x), on a fair market value of Rs 595.49 per share against a buy-back price of Rs 40 for 7,80,000 shares.

The facts explain the price. Under a Facility Agreement of 4 November 1999 the company was to build and operate an ammonia storage facility inside Indo Gulf Corporation Ltd’s premises in Gujarat, with power supplied by Indo Gulf. The Gujarat Electricity Board’s captive power policy allowed supply to an associate company in which the producer held a stipulated minimum equity, so Indo Gulf was required to hold 26 per cent of the company’s issued capital, and 7,80,000 equity shares of Rs 10 face value were allotted at a premium of Rs 30, an issue price of Rs 40. It was contemplated from inception that Indo Gulf would claim neither dividend nor capital appreciation and that on cessation of the Facility Agreement the shares would be bought back at the same Rs 40, the arrangement being linked to a refundable interest-free deposit of Rs 3 crore. Indo Gulf’s undertaking merged into Hindalco Industries Ltd with effect from 1 April 2002, the Facility Agreement ran to 31 January 2020, and a Settlement Agreement of 2 November 2021 provided Rs 33 crore for transfer of the facility and settlement of the arrangements. The buy-back at Rs 40 followed and the shares were extinguished on 7 March 2022. Immediately before it the company had made a rights issue in which Hindalco did not participate.

The Assessing Officer first referred the arrangement under section 144BA. The Approving Panel, by directions dated 30 January 2025, found that the 26 per cent participation had been taken not to earn profit or participate in management but to meet the Electricity Board requirement, that it was essentially a legal formality rather than an investment in the conventional commercial sense, that returning the shares at the allotment price was not out of the ordinary given the original arrangement, and that the non-participation in the rights issue and the buy-back were a natural consequence of the regulatory requirement and not actuated by a motive of obtaining a tax benefit. It held the arrangement was not an impermissible avoidance arrangement within section 96. The Assessing Officer then examined the buy-back independently under clause (x) and made the addition anyway.

The Tribunal did two things that govern how the decision can be used. First, it expressly declined to decide the wider proposition. At paragraph 18:

“We find it unnecessary to pronounce upon the wider proposition canvassed by the assessee that once the Approving Panel has rejected application of GAAR, every other anti-abuse or substantive provision necessarily stands excluded. Even if we proceed on the premise urged by the Revenue that section 56(2)(x) operates independently of Chapter X-A and that rejection of GAAR does not, by itself, preclude recourse to another provision of the Act, it would still be incumbent upon the Revenue to demonstrate that the essential statutory ingredients of section 56(2)(x) are independently satisfied.”

It said the same again in its summary at paragraph 39: “In reaching this conclusion, we have not proceeded on any wider proposition that rejection of GAAR by the Approving Panel necessarily excludes every other provision of the Act”. So Sanjana is not authority that a finding under the general anti-avoidance rule forecloses every other provision. It decides the case on the ingredients of clause (x).

Second, it answered the receipt argument on those ingredients. At paragraph 19: “The statutory requirement is not merely the physical or juridical movement of an instrument from one person to another; what the provision contemplates is receipt of “property” by the recipient”, and, in the same paragraph, “A company buying back its own shares stands on an altogether different footing. The transaction does not result in the company acquiring an investment in itself; it results in reduction of its outstanding share capital and the shares bought back are required to be extinguished.” Then, at paragraph 20:

“We are unable to read a statutory buy-back in such a disjointed manner. Section 68(7) of the Companies Act, 2013 mandates that a company buying back its securities shall extinguish and physically destroy the securities so bought back within the prescribed period after completion of the buy-back. The extinguishment is, therefore, not an independent commercial act undertaken at the discretion of the company after acquiring the shares as an investment; it is an integral statutory consequence of the buy-back itself.”

And, in the same paragraph: “The receipt and extinguishment cannot, therefore, be artificially severed so as to postulate, during an interstitial moment, the existence of property in the hands of the company when the very transaction by which the shares come back to the company necessarily culminates in their extinction.”

On the Revenue’s attempt to confine the earlier authority to clause (viia), the Tribunal held at paragraph 22 that “The fact that section 56(2)(x) is wider in its coverage of recipients than its predecessor does not dispense with the fundamental requirement that the transaction must result in receipt of “property” by the person sought to be taxed.” Its own reading of the Delhi judgment, at paragraph 21, is that the High Court “observed that reliance by the Tribunal upon an earlier decision rendered under section 56(2)(viia) was not, by itself, appropriate because the applicable provision before it was section 56(2)(x)”, while recording that the High Court “nevertheless upheld the deletion on the independent reasoning that a buy-back of a company’s own shares is in substance a reduction of share capital and does not result in acquisition of property of the nature contemplated by section 56(2)(x)”. The second half of that reading is exact. The first understates paragraph 29, where the Delhi Court put the point higher: it accepted the Revenue’s contention that the reliance was misplaced. Paragraph 29 is cited from the judgment and not from the later order.

The valuation dispute then fell away, and the sentence to keep is at paragraph 23: “Rule 11UA provides the computational mechanism once the charging/deeming provision is otherwise attracted; it cannot itself create the charge where the foundational conditions of section 56(2)(x) are absent.” In the same paragraph the Tribunal left the section 115QA question undecided: “Equally, it is unnecessary for us to decide the broader contention of the assessee that section 115QA constitutes such an exhaustive and exclusive code governing buy-back that section 56(2)(x) can never operate alongside it.” The Approving Panel’s findings were treated as adding “further support” on the peculiar facts, not as the foundation of the result. The appeal was dismissed.

A remand, and a precondition to act on

The remand first. In M/s. Updater Services Ltd. v. DCIT and the cross-appeal DCIT v. M/s. Updater Services Ltd., ITAT Chennai Bench “A”, ITA Nos. 1339/Chny/2025 and 1616/Chny/2025 with C.O. No. 66/Chny/2025, assessment year 2017-18, order dated 14 November 2025, the buy-back addition under clause (viia), the section 115QA levy and a section 36(1)(iii) disallowance were all set aside and remitted to the Assessing Officer for fresh adjudication, the Tribunal recording that “we have not expressed any opinion on the merits of the additions or deletions”. That is not a decision the other way. It is a coordinate bench declining to apply the line summarily and sending the matter back for valuation and fact-finding, and it shows the issue is still being contested at the assessment stage.

The precondition is factual, it is built into the ratio, and it is the one a finance team has to act on. In DCIT v. TPS Infrastructure Ltd., ITAT Delhi Bench “G”, ITA 6433/Del/2018, order dated 14 December 2022, reported at 2022 (12) TMI 693, the Tribunal accepted the legal position but restored the matter to the Assessing Officer to verify that the shares had in fact been extinguished by reduction of paid-up capital, directing deletion only if that was confirmed. The whole of the reasoning in both decisions above rests on extinguishment, so extinguishment has to have actually happened and be provable years later. Section 68(7) of the Companies Act, 2013 requires the shares to be extinguished and physically destroyed within seven days of the last date of completion of the buy-back, and section 68(9) requires a register recording “the date of cancellation of shares or securities, the date of extinguishing and physically destroying the shares or securities and such other particulars as may be prescribed”. Those two dates, the register, the return filed with the Registrar under section 68(10), the capital redemption reserve entry and the movement in the paid-up capital figure between two balance sheets are the evidence of the point on which the whole defence turns. A company that cannot produce them is arguing law without facts.

How firmly this can be put

Every decision on the question, from 2018 to 2026, runs one way, and the line now includes a High Court. Globe Capital is the only High Court decision on the question, it is an oral judgment, and it binds within the Delhi jurisdiction and is persuasive elsewhere; there is no decision of the Supreme Court on the question. Almost all of the Tribunal authority is on clause (viia) rather than clause (x), and only three decisions are on clause (x): the Globe Capital Tribunal order, the Globe Capital judgment and Sanjana. And the Revenue has not conceded: in August 2026 it was still arguing that the taxable event is the receipt and that Vora was distinguishable as a clause (viia) case. Both records carry the same absence, and it can be used in a submission. The Tribunal in Globe Capital recorded that no contrary higher judicial authority had been placed before it, and the Commissioner (Appeals) in Sanjana recorded that no contrary judicial view had been brought on record, so in both cases the absence is on the file and not merely in commentary.

The result has attracted a policy criticism rather than a legal one. Vinod Kothari & Co., in a note of November 2026 titled “‘Receipt’ without ‘property’: tax arbitrage on buy-back of own shares under section 56(2)(x)”, accepts the Sanjana reasoning as the law while objecting that it leaves an arbitrage by which value shifts from exiting shareholders to continuing ones with no charge on the shortfall anywhere. That is a criticism of the consequence, and it is the shape of the argument to expect from an assessing officer who has read it. It is answered the way the Tribunal answered the Revenue: a deeming provision is applied on its ingredients, and the remedy for a gap in a charge is legislation and not construction.

The same question under the Income-tax Act, 2025: section 92

Globe Capital and Sanjana Cryogenic are both decisions on section 56(2)(x) of the 1961 Act, and for a buy-back in a tax year beginning on or after 1 April 2026 the provision an assessing officer will reach for is section 92 of the Income-tax Act, 2025, headed “Income from other sources”. Section 92(2)(m)(iii)(B) charges a person who receives any property other than immovable property “for a consideration which is less than the aggregate fair market value of the property by an amount exceeding Rs. 50000”, the income being “the aggregate fair market value of such property as exceeds such consideration”. There is no percentage band on that limb: the immovable property limb in sub-clause (ii)(B) takes the higher of Rs 50,000 or ten per cent of the consideration, while the limb that catches shares carries the flat Rs 50,000 figure alone. Fair market value of property other than immovable property “means the value determined by such method as may be prescribed”, under section 92(5)(c), which routes to the unquoted-share entries of rule 57 of the Income-tax Rules, 2026, and rule 56(i) fixes the valuation date for a section 92 case as the date on which the assessee receives the property or the consideration. That date is itself contestable on a buy-back, because the whole of the company’s argument is that nothing is ever received. The stamp-duty-date rule and the reference to a Valuation Officer in section 92(4) are confined by their own words to the immovable property limb.

One exclusion route is closed and one is a checkpoint. Section 92(3) of the 2025 Act lists what the charge does not reach, and the clause that would have to carry a buy-back as a transaction is clause (g), which admits a transaction not regarded as a transfer only under the clauses of section 70(1) of that Act which it names: the partition, intra-group, amalgamation, demerger, co-operative bank reorganisation, fund relocation, infrastructure financing and public sector plan clauses. Section 70(1) runs from (a) to (zl), and no clause in it concerns a company purchasing its own shares or the extinguishment or cancellation of shares, so a buy-back is a transfer under the 2025 Act and a company cannot rest on that exclusion.

The one exclusion left is not about the transaction at all. Clause (i) takes out a receipt from such class of persons, and on such conditions, as may be prescribed, and the power has been exercised: rule 58 of the Income-tax Rules, 2026 is headed “Prescribed class of persons for the purpose of section 92(3)(i) and section 79 of the Act”. Whether a company on its own buy-back answers that class is a question on the terms of rule 58 applied to the facts, and it is checked before the argument on the definition of property is reached.

The contest is otherwise where it was under clause (x), on the definition of property. Section 92(5)(f) defines “property” as “the following capital asset of the assessee” and lists “shares and securities”, so shares are squarely inside the list and the question is whether what comes back to a company on its own buy-back becomes a capital asset of that company at all. That is the extinguishment argument restated on the new words, and it is taken up as question 17 below; the two decisions above were decided on clause (x) of the 1961 Act and not on section 92.

This line decides what happens in the company’s hands and says nothing about the shareholder’s charge on the same transaction, which arises under section 2(22)(f) or section 46A of the 1961 Act or section 69 of the 2025 Act depending on when the buy-back took place. And it does not make valuation irrelevant. It makes valuation the second question rather than the first, which is what Updater Services shows.

The historic section 56(2)(viia) line

The clause that preceded clause (x) still matters. It governs any receipt in the window it covers, and search and reassessment proceedings reach back into that window. It is the clause on which almost all of the buy-back authority was decided, so a submission built on that authority has to be translated before it is used in a clause (x) assessment. And the translation loses a limb.

Section 56(2)(viia) charges a receipt by “a firm or a company not being a company in which the public are substantially interested”, of “any property, being shares of a company not being a company in which the public are substantially interested”, received “on or after the 1st day of June, 2010 but before the 1st day of April, 2017”, either without consideration where the aggregate fair market value exceeds fifty thousand rupees, or for a consideration less than that value by more than fifty thousand rupees, the excess being the income. The clause restricts itself twice over, and both restrictions are gateways. The recipient could only be a firm or a closely-held company, so an individual or a Hindu undivided family was never within the clause. And the property could only be shares of a closely-held company, so quoted shares were outside it and securities other than shares were outside it.

Clause (viia) was never omitted

It was sunset. Section 29(II) of the Finance Act, 2017 inserted the words “but before the 1st day of April, 2017” after “1st day of June, 2010”, by the same section that inserted clause (x) at sub-clause (III). The clause therefore remains on the statute book and is still printed in the Act, with no application to any receipt on or after 1 April 2017. The practical consequence is the same as omission; the drafting is not, and the distinction matters wherever a receipt falls inside the window, because inside it the narrower class of recipients and the narrower subject-matter are both available as arguments and the wider clause (x) is not in play.

Vora Financial Services

M/s. Vora Financial Services P. Ltd. v. Assistant Commissioner of Income Tax, 2(3)(1), Mumbai, ITA No. 532/Mum/2018, ITAT Mumbai “F” Bench, B.R. Baskaran AM and Pawan Singh JM, assessment year 2014-15, pronounced on 29 June 2018, reported at [2018] 171 ITD 646 and 194 TTJ 746 (Mum.). The name is spelt Vora; it is misspelt “Vohra” in several Tribunal orders, and a citation carrying that spelling is the same case.

The company bought back 12,19,075 of its own shares at Rs 26 against a book value of Rs 32.80, and the Assessing Officer added the difference of Rs 82,89,710. The Tribunal read clause (viia) with the Memorandum to the Finance Act, 2010, treated it as a counter-evasion measure, and laid down two cumulative conditions, each of which failed. The shares received had to become the “property” of the recipient company, which required them to become a capital asset in its hands; the bought-back shares were extinguished by a reduction of share capital and so never became the company’s property. And the shares had to be “shares of any other company”; a company’s own shares are not shares of another company. The conclusion was that “the tax authorities are not justified in invoking the provisions of sec. 56(2)(viia) for buyback of own shares”, and the addition was directed to be deleted.

Tribunal benches have continued to follow Vora, including in 2025 and 2026, and the Mumbai Bench in Sanjana Cryogenic treated its reasoning as consistent with the position under clause (x).

VITP

VITP Private Limited, Hyderabad v. Deputy Commissioner of Income Tax, Circle-17(2), Hyderabad, ITA Nos. 67 and 76/Hyd/2018, ITAT Hyderabad Benches “A”, Rama Kanta Panda AM and K. Narasimha Chary JM, assessment years 2013-14 and 2014-15, pronounced on 3 August 2022, cited as 2022 (8) TMI 220, which is the citation the Delhi High Court itself prints at paragraph 9 of Globe Capital. The company bought back 28 lakh of its own shares from its holding company at Rs 100, the face value, against a book value of Rs 146.817, and transferred Rs 28 crore to a capital redemption reserve. The Assessing Officer taxed the shortfall under clause (viia). The Tribunal applied the two Vora conditions, holding that a company cannot hold its own shares so as to make them its property and that own shares are not shares of another company, followed Vora, and deleted the additions in both years.

What the High Court actually did with VITP

VITP is the decision named at paragraph 9 of Globe Capital and referred to at paragraph 29 as the judgment of the Tribunal’s Hyderabad Bench, set out above, and two readings of that paragraph are both wrong. It is not an endorsement of VITP, because the Court accepted the Revenue’s criticism of the Tribunal’s reliance on it rather than merely noting the point. And it is not a doubt about the substance of the Vora and VITP reasoning: what the Court said was that the provision considered there was a different provision, and it reached the same destination under clause (x) by its own route, extinguishment under section 68(7) of the Companies Act, 2013.

The limb that is lost in translation

Under clause (viia) there were two independent reasons why a buy-back was outside the charge: the shares did not become the recipient’s property, and they were not shares of any other company. Only the first survives the move to clause (x). The definition of property in clause (x) includes shares and securities generally, without the “other company” qualifier, so the second ground has no counterpart. A reply to a clause (x) show-cause notice that reproduces the Vora two-condition analysis is therefore half a reply, and the Revenue’s answer to it, that clause (x) is wider than its predecessor, is correct as far as it goes. The ground that survives is extinguishment, and it is the ground on which Globe Capital and Sanjana Cryogenic were decided.

The rest of the clause (viia) line runs the same way, and is set out because it is the body of authority an assessing officer will be shown and will have to distinguish.

Decision	Forum, number, date	Result
Vora Financial Services (P.) Ltd. v. ACIT	ITAT Mumbai “F”, ITA 532/Mum/2018, 29.06.2018	Addition deleted; two cumulative conditions laid down
VITP (P.) Ltd. v. DCIT	ITAT Hyderabad “A”, ITA 67 and 76/Hyd/2018, 03.08.2022	Additions deleted in both years
DCIT v. TPS Infrastructure Ltd.	ITAT Delhi “G”, ITA 6433/Del/2018, 14.12.2022	Clause held inapplicable; restored to the Assessing Officer only to verify extinguishment
DCIT v. Venture Lighting India Ltd.	ITAT Chennai “C”, ITA 3171/CHNY/2019, 14.12.2022	Revenue’s appeal dismissed
Lupin Investments (P.) Ltd. v. DCIT	ITAT Mumbai “A”, ITA 4635/Mum/2024, 09.07.2025	Addition of Rs 34,71,17,122 deleted
Silgate Solutions Ltd. v. DCIT	ITAT Mumbai “G”, ITA 5367/Mum/2025, 04.11.2025	Addition of Rs 1,44,75,000 deleted
ACIT v. Gamma Pizzakraft Lanka (Pvt.) Ltd.	ITAT Delhi “D”, IT(IT)A 26 and 27/Del/2025, 12.08.2026	Revenue’s appeals dismissed; and independently, not taxable in India, the assessee being a non-resident

TPS Infrastructure held that a company’s own shares cannot become the property of the recipient company, and Gamma Pizzakraft Lanka followed it in the same words, so the proposition has been stated identically by two benches more than three and a half years apart. Venture Lighting went beyond the property point and rejected the Revenue’s alternative “hidden asset” argument built on section 2(22)(d) read with section 115-O, relying on the Vora reasoning as exactly identical to the case before it. That matters on a live file, because the “hidden asset” argument is the natural fallback once the receipt argument fails, and it has been met once already.

Open questions on the 2025 Act

Each of these arises on a live file and is argued both ways, with the view of Sunil Maloo & Co., Ahmedabad, stated where the firm has one. The numbering runs continuously across the four Parts.

13. Is a promoter’s short-term gain on unquoted shares inside the Table in section 69(2)?

The Table identifies the income it reaches by naming charging sections: Sl. No. 1 is “Short-term capital gains referred to in section 196 arising from the transfer of such securities”, Sl. No. 2 is long-term gains referred to in section 197 or section 198. Section 196 charges short-term capital gains in certain cases at twenty per cent and is directed at securities on which securities transaction tax has been paid. A promoter’s short-term gain on unquoted shares is charged at the rates otherwise applicable to him.

For the Revenue, column B describes the character of the gain, and Sl. No. 2 names two sections rather than one, which shows the Table identifying a kind of gain rather than picking out a species of security; and the narrow reading takes the promoter of an unlisted company outside the only charge enacted for him, in a provision whose promoter definition is written for unlisted companies.

For the assessee, an additional income-tax is imposed by the words that impose it. Sl. No. 1 does not say “short-term capital gains”; it says short-term capital gains referred to in section 196, and this gain is not referred to there.

Where it stands: open on the face of the Table. The firm’s view is that such a gain is outside column B, because a charging entry that names a section is read as naming it, so the return is filed on that footing and the Revenue is left to make the adjustment.

14. Does section 79 of the 2025 Act reach a buy-back of unquoted shares?

Section 79(1) substitutes a prescribed fair market value for the consideration on the transfer of a share other than a quoted share, “for the purposes of section 72”. Section 69(1) computes the buy-back gain on the consideration received, expressly “subject to the provisions of section 72”. Section 79 does not amend section 69 and is not mentioned in it, and the only entries of rule 57 expressed to serve section 72 are the unquoted-share entries.

For the Revenue the route needs no amendment to section 69: the gain is computed under section 72, section 79 fixes the full value of consideration for that computation, and the shareholder’s side of a buy-back is a transfer by him of a share other than a quoted share.

For the assessee, section 79 is aimed at a transferor who understates a price the parties control, while a buy-back price is fixed by resolution and offer under section 68 of the Companies Act, 2013; and what the shareholder parts with ceases to exist rather than passing to someone who can enjoy it.

Where it stands: open, and it is the largest unflagged exposure in a private-company buy-back priced near book value. The firm’s view is that section 79 is capable of applying on the mechanism, so the figure it would substitute is worked out while the price is still open.

Beside that question sits a checkpoint rather than a dispute. Section 79(2) disapplies sub-section (1) for transfers by such class of persons, and on such conditions, as may be prescribed, and the power has been exercised: the provision is rule 58 of the Income-tax Rules, 2026, headed “Prescribed class of persons for the purpose of section 92(3)(i) and section 79 of the Act”, and it serves both provisions. Whether a given tendering shareholder answers that class is an application of the rule to his facts and not a question of construction, and relief under it removes the preceding question altogether.

15. Does a buy-back outside section 68 of the Companies Act escape the promoter’s additional income-tax?

The condition that the purchase be “in accordance with the provisions of section 68 of the Companies Act, 2013” sits in section 69(2) and not in section 69(1). On the face of the section a non-compliant purchase still produces capital gains in the shareholder’s hands while the promoter’s additional income-tax, and the surcharge that rides on it, do not attach.

For the Revenue the words describe the transaction the sub-section is aimed at rather than impose a condition on the charge, and a promoter cannot escape a layer enacted for him by establishing that his own company failed a company-law condition; a reading that rewards non-compliance with a lower charge is not one the words compel.

For the assessee the drafter put the words in sub-section (2) and not in sub-section (1), having had both sub-sections in front of him in a single substitution, and an additional income-tax is imposed by the words that impose it.

Where it stands: open on the face of the section, and untested. The firm’s view is that the placing of the words is deliberate, because sub-sections (2) and (3) were substituted together and the condition was put in one of them only; but the position is taken with the company-law compliance record on the file, because the argument is of no use to a promoter whose own company’s default he must first establish.

16. Was section 115QA an exhaustive code that ousted section 56(2)(x)?

The contention was pressed in Sanjana Cryogenic, and at paragraph 23 the Tribunal held it “unnecessary for us to decide the broader contention of the assessee that section 115QA constitutes such an exhaustive and exclusive code governing buy-back that section 56(2)(x) can never operate alongside it”. It decided the appeal on the narrower ground that no property was received, as the Delhi High Court had in Globe Capital.

For the Revenue the two charges sit in different chapters on different measures. Section 115QA taxes distributed income and says nothing about clause (x), which applies to any person. Sub-section (5) bars a deduction in respect of that income and the tax on it, which is not an exclusion of another charge, and nothing in the Chapter is expressed to be exhaustive.

For the assessee, Chapter XII-DA was a complete scheme: a charge, a measure, a prescribed subtrahend, a payment date, interest, recovery, finality and a deduction bar. A transaction charged in full in the company’s hands cannot also generate income in those hands on the same facts.

Where it stands: expressly undecided by the only forum before which it arose. The firm’s view is that section 115QA was not an exhaustive code displacing every other charge on the company, because sub-sections (4) and (5) operate only on the income charged under sub-section (1), which is the company’s distributed income, and on the tax on that income, while a charge under section 56(2)(x) is on a different receipt measured on a different footing; so neither the finality in sub-section (4) nor the bar on deductions in sub-section (5) of itself answers it, and the non-obstante opening displaces other provisions only so far as they are inconsistent with the charge the sub-section creates; the point is therefore pleaded in the alternative on a pre-sunset year, and pleaded second, because the ground that has twice succeeded is the absence of a receipt.

17. Does the extinguishment reasoning carry into section 92 of the 2025 Act?

For a buy-back in tax year 2026-27 or later the counterpart of section 56(2)(x) of the 1961 Act is section 92 of the Income-tax Act, 2025. Section 92(2)(m)(iii)(B) charges the recipient of property other than immovable property for a consideration less than its aggregate fair market value by more than Rs 50,000. Section 92(5)(f) defines “property” as “the following capital asset of the assessee” and lists “shares and securities”.

For the Revenue the company-level charge has gone from 1 April 2026, section 92 reaches any person, and its exclusions in sub-section (3) do not mention a buy-back: clause (g) admits only the listed clauses of section 70(1) of that Act, and section 70(1) carries no clause for a company’s purchase of its own shares or for the cancellation of shares. On the words the assessee relies on, the Revenue’s answer is that “the following capital asset of the assessee” defines the kind of thing that counts as property, marking off a capital asset from stock in trade, and does not require the recipient to keep what he receives; that the charge is on the receipt, and asks what came in rather than what became of it afterwards; and that the destruction of a company’s own shares after they come back is produced by the company’s own statutory obligation, which cannot be read into a definition that says nothing about it. Rule 57 prescribes a fair market value for unquoted shares that serves section 92, rule 56(i) gives the valuation date as the date of receipt of the property or the consideration, and the machinery is complete.

For the assessee the words that decided the question under clause (x) are reproduced: property must be a capital asset “of the assessee”, and shares a company buys back and must extinguish and destroy under section 68(7) of the Companies Act, 2013 do not become its capital asset.

Where it stands: untested, section 92 being new law, and to be answered on its own words, which repeat the earlier architecture in the respect that mattered. The firm’s view is that the same answer follows, and that the file is built the same way, on the extinguishment record and not the valuation.

On a live file: a buy-back under the 2025 Act

What to establish on the file, and what has to be provable later.

Identify the Act and the year. For a tax year beginning on or after 1 April 2026 the computation runs under the Income-tax Act, 2025, with the Finance Act, 2026 amendments to section 69 in force. Confirm the gain is computed under section 69(1), not taxed as a dividend.

Settle promoter status. For a listed company, section 69(3)(a) runs through a chain of regulations. Otherwise section 69(3)(b) is disjunctive: a promoter answers section 2(69) of the Companies Act, 2013 or holds, directly or indirectly, more than ten per cent of the shareholding. Identify every tendering holder who crosses that test.

Build the additional layer in order. Determine whether the gain is short-term or long-term, which row of the section 69(2) table it falls in and whether column C or D applies, and apply the rate to the gain and not to the tax on it. Add the twelve per cent surcharge under section 3(6) of the Finance Act, 2026, which rides on the additional income-tax alone, then the charge under section 3(16). Check whether the purchase was in accordance with section 68 of the Companies Act, 2013, which governs section 69(2), not section 69(1).

Unquoted shares. Where the consideration is below fair market value, work the figure section 79 would substitute for the purposes of section 72 and settle the position before the return goes in, because whether it reaches the section 69 computation has to be argued. Compute it, on the reading set out above, on the unquoted equity share entry of rule 57 of the Income-tax Rules, 2026, an adjusted net asset value formula taking immovable property at stamp duty value, reducing assets by income-tax paid net of any refund claimed and by any amount carried as an asset that represents no asset, and excluding from liabilities reserves and surplus other than those set apart towards depreciation, struck at the date rule 56(i) prescribes for a section 79 case, the date of transfer. Check whether the shareholder falls in the class prescribed by rule 58.

An addition in the company’s own hands. For a tax year governed by the Income-tax Act, 2025 the charge is section 92(2)(m)(iii)(B) of that Act, the fair market value is the rule 57 unquoted equity share entry of the Income-tax Rules, 2026, and the valuation date under rule 56(i) is the date on which the assessee receives the property or the consideration; check whether the company falls in the class prescribed by rule 58 for section 92(3)(i), and assemble the extinguishment record the same way. For an earlier year the charge is section 56(2)(x) of the 1961 Act: fix the date of receipt and the assessment year, identify which version of rule 11UA governs that year and which sub-clause of it the shares fall in, and assemble the extinguishment evidence. For a receipt before 1 April 2017, test section 56(2)(viia)’s two narrower gateways: a recipient that is a firm or a closely held company, and property that is shares of a closely held company other than the recipient.

Decisions referred to in this series

These are the decisions relied on across the four Parts, of the High Court and of the Income Tax Appellate Tribunal (ITAT), with their particulars and the limits of what each one holds. Each is set out by CA Sunil Maloo of Sunil Maloo & Co., Ahmedabad, who is the author of this series.

Pr. Commissioner of Income Tax, Central - II, New Delhi v. M/s Globe Capital Market Ltd.

High Court of Delhi at New Delhi, Division Bench of Dinesh Mehta and Vinod Kumar JJ, judgment per Dinesh Mehta J and marked “(Oral)”, ITA 364/2024, decided 7 April 2026, assessment year 2018-19, reported at [2026] 185 taxmann.com 513 (Del.). The Revenue’s appeal against the deletion of an addition of Rs 16,33,34,250 under section 56(2)(x) was dismissed: a buy-back under section 68 of the Companies Act, 2013 is in substance a reduction of share capital, the property extinguishes once the shares are bought back, and the hypothesis that the company acquired an asset below fair market value has no legs to stand on. At paragraph 29 the Court accepted the Revenue’s contention that the Tribunal’s reliance on the Hyderabad Bench decision was misplaced, because the provision considered there was section 56(2)(viia) and not section 56(2)(x), while treating that reliance as only incidental to the result. The Court therefore did not approve that decision. This is the only High Court decision on the question and it is an oral judgment.

DCIT, Central Circle-15, New Delhi v. M/s Globe Capital Market Ltd.

ITAT Delhi Bench “F”, Dr B.R.R. Kumar AM and Ms Astha Chandra JM, ITA No. 967/Del/2023, order dated 25 September 2023, assessment year 2018-19. The order under appeal in the High Court. The Revenue’s appeal was dismissed and the Commissioner (Appeals)’s deletion upheld, the shares having been extinguished by reduction of paid-up capital, and the Tribunal recorded that no contrary higher judicial authority had been placed before it.

DCIT CC-8(3), Mumbai v. Sanjana Cryogenic Storages Ltd., Mumbai

ITAT Mumbai Bench “F”, Amit Shukla JM and Arun Khodpia AM, ITA No. 2503/Mum/2026, assessment year 2022-23, heard 3 August 2026 and pronounced 31 August 2026. An addition of Rs 43,32,82,200 under section 56(2)(x), on a rule 11UA value of Rs 595.49 per share against a buy-back price of Rs 40 for 7,80,000 shares, was deleted by the Commissioner (Appeals), and the Revenue’s appeal against that deletion was dismissed. Receipt and extinguishment cannot be severed, because under section 68(7) of the Companies Act, 2013 the extinguishment is an integral statutory consequence of the buy-back, so the company receives no property. The Tribunal expressly declined to decide whether rejection of the general anti-avoidance rule by an Approving Panel excludes every other provision, and whether section 115QA is an exhaustive and exclusive code.

M/s. Vora Financial Services P. Ltd. v. Assistant Commissioner of Income Tax, 2(3)(1), Mumbai

ITAT Mumbai “F” Bench, B.R. Baskaran AM and Pawan Singh JM, ITA No. 532/Mum/2018, assessment year 2014-15, pronounced 29 June 2018, reported at [2018] 171 ITD 646 and 194 TTJ 746 (Mum.). The assessee’s appeal was allowed and an addition of Rs 82,89,710 under section 56(2)(viia) was directed to be deleted on two cumulative conditions, each of which failed: the shares must become the property, and so a capital asset, of the recipient company, and they must be shares of some other company. The name is spelt Vora; a citation carrying the spelling “Vohra” is the same case.

VITP Private Limited, Hyderabad v. Deputy Commissioner of Income Tax, Circle-17(2), Hyderabad

ITAT Hyderabad Benches “A”, Rama Kanta Panda AM and K. Narasimha Chary JM, ITA Nos. 67 and 76/Hyd/2018, assessment years 2013-14 and 2014-15, pronounced 3 August 2022, cited as 2022 (8) TMI 220, which is the citation the Delhi High Court itself prints in Globe Capital. The Tribunal applied the two Vora conditions, allowed both appeals and deleted the section 56(2)(viia) additions in both years. This is the decision on which the Tribunal below in Globe Capital relied, and the Delhi High Court held that reliance misplaced because the provision considered in it was section 56(2)(viia) and not section 56(2)(x).

DCIT v. TPS Infrastructure Ltd.

ITAT Delhi Bench “G”, ITA 6433/Del/2018, order dated 14 December 2022, cited as 2022 (12) TMI 693. The Tribunal accepted the legal position, that a company’s own shares cannot become the property of the recipient company, and restored the matter to the Assessing Officer to verify that the shares had in fact been extinguished by reduction of paid-up capital, directing deletion only if that was confirmed. The ratio therefore carries a factual precondition.

DCIT v. Venture Lighting India Ltd.

ITAT Chennai Bench “C”, ITA 3171/CHNY/2019, order dated 14 December 2022, cited as 2022 (12) TMI 696. The Revenue’s appeal was dismissed on the Vora reasoning, and the Revenue’s alternative “hidden asset” argument built on section 2(22)(d) read with section 115-O was rejected.

Lupin Investments (P.) Ltd. (successor to Zyma Laboratories Ltd.) v. DCIT

ITAT Mumbai Bench “A”, ITA 4635/Mum/2024, order dated 9 July 2025. An addition of Rs 34,71,17,122 under section 56(2)(viia) was deleted.

Silgate Solutions Ltd. v. DCIT

ITAT Mumbai Bench “G”, ITA 5367/Mum/2025, order dated 4 November 2025. An addition of Rs 1,44,75,000 under section 56(2)(viia) was deleted.

ACIT v. Gamma Pizzakraft Lanka (Pvt.) Ltd.

ITAT Delhi Bench “D”, IT(IT)A Nos. 26 and 27/Del/2025, order dated 12 August 2026. The Revenue’s appeals were dismissed, the Tribunal stating the TPS Infrastructure proposition in the same words, and independently on the footing that the assessee is a non-resident.

M/s. Updater Services Ltd. v. DCIT, and the cross-appeal DCIT v. M/s. Updater Services Ltd.

ITAT Chennai Bench “A”, ITA Nos. 1339/Chny/2025 and 1616/Chny/2025 with C.O. No. 66/Chny/2025, assessment year 2017-18, order dated 14 November 2025. The section 56(2)(viia) buy-back addition, the section 115QA levy and a section 36(1)(iii) disallowance were all set aside and remitted to the Assessing Officer for fresh adjudication, the Tribunal recording that “we have not expressed any opinion on the merits of the additions or deletions”. It is not a decision either way on the merits.

Concordance: the 1961 Act and the 2025 Act

A buy-back now has to be worked under both Acts, depending on the year, so each provision used in this series is mapped to its counterpart. The numbering does not carry across, and the same section number can mean two different things in the two Acts: section 70 of the 1961 Act is the set-off of a loss from one source against income from another source under the same head, while section 70 of the 2025 Act is the list of transactions not regarded as transfer, and both meanings are used in this series. Section 70 of the Companies Act, 2013, which prohibits a buy-back in certain circumstances, is a third provision of that number referred to in this series and belongs to neither of the two Acts mapped below. Section 112 of the 1961 Act is the special rate on long-term capital gains, while section 112 of the 2025 Act is the carry forward and set off of a business loss. Separately, section 69 of the Companies Act, 2013, the transfer of certain sums to the capital redemption reserve account, is a different provision from the identically numbered buy-back charge in the Income-tax Act, 2025.

1961 Act	What it does	2025 Act counterpart	Note
s.2(22)(d)	makes a distribution on a reduction of capital a dividend, to the extent of accumulated profits	s.2(40)(d), within the definition of “dividend”	Substance the same on the measure, the 1961 text’s reference to accumulated profits arising after the previous year ending next before 1 April 1933 not being carried forward. Unamended by the Finance Act, 2026, and the carve-out at “(i)” of s.2(40) still refers to sub-clause (c) or (d), so this is the limb that keeps a capital-reduction distribution within the dividend charge after the omission of (f).
s.2(22)(f)	makes a payment on a buy-back under s.68 of the Companies Act, 2013 a dividend	s.2(40)(f), omitted with effect from 1 April 2026	The slot prints as an omitted sub-clause and the consolidated print’s footnote records the omission by the Finance Act, 2026 and sets out the sub-clause as it stood. The consequential change closed the range in s.7(2)(a) from “(a) to (f)” to “(a) to (e)”.
s.46A	deems the difference between cost of acquisition and consideration on a buy-back to be capital gains of the shareholder	s.69, “Capital gains on purchase by company of its own shares or other specified securities”	Same core charge in s.69(1). Sub-sections (2) and (3), substituted by the Finance Act, 2026, add a promoter-only additional income-tax with no counterpart in the 1961 Act.
s.47	lists the transactions not regarded as a transfer	s.70, “Transactions not regarded as transfer”	Same function, with the clauses running (a) to (zl). No clause covers a company’s purchase of its own shares, or the extinguishment or cancellation of shares, so a buy-back is a transfer under the 2025 Act. Clause (zb) is the conversion of preference shares into equity shares, and the exclusion in s.92(3)(g) admits only the clauses of s.70(1) it names, none of which is a buy-back.
s.48	mode of computation of capital gains	s.72	The capital-gains computation provision of the 2025 Act. It is the provision the s.69(1) charge is expressly made subject to, and the provision for whose purposes s.79 substitutes a fair market value.
s.50CA	substitutes a prescribed fair market value as the full value of consideration, for the purposes of s.48, where a share other than a quoted share is transferred for less than that value	s.79	Same mechanism in the 2025 Act, substituting for the purposes of s.72. Each has a power to take a prescribed class of persons, subject to prescribed conditions, out of its operation: the proviso to s.50CA, which disapplies the whole section and is exercised by rule 11UAD, and s.79(2), which disapplies s.79(1) and is exercised by rule 58. The value for s.50CA is prescribed by rule 11UAA of the 1962 Rules, struck at the date of transfer. The s.50CA Explanation defines a quoted share by regularity of quotation and current transactions, so listing alone does not take a share outside it.
s.111A	charges short-term capital gains at a special rate	s.196, “Tax on short-term capital gains in certain cases”	Twenty per cent, directed at equity shares, units of an equity-oriented fund and units of a business trust on which securities transaction tax has been paid. The first row of the s.69(2) Table is keyed to gains “referred to in section 196”, so whether a short-term gain that is not charged under that section is inside that row is open on the words, which is argued at question 13 of this series.
s.112	charges long-term capital gains at a special rate	s.197, “Tax on long-term capital gains”	Twelve and a half per cent.
s.112A	charges long-term capital gains on securities transaction tax paid equity	s.198, “Tax on long-term capital gains in certain cases”	Twelve and a half per cent above Rs 1,25,000. The second row of the s.69(2) Table is keyed to gains “referred to in section 197 or section 198”.
s.70	set-off of losses under the same head, with long-term capital losses ring-fenced	s.108, “Set off of losses under same head of income”	Substance the same: a short-term capital loss sets off against income computed in respect of any other capital asset, a long-term capital loss only against income computed in respect of another long-term capital asset.
s.71	set-off of a loss under one head against income under another head	s.109	The provision under which a loss computed under one head is set off against income under any other head, as sections 110(1) and 112(1) of the 2025 Act each describe it. Whether it reproduces the bar in s.71(3) of the 1961 Act is a question on its own words.
s.74	carry forward of a capital loss for eight years, with the same ring-fence	s.111, “Carry forward and set off of loss from Capital gains”	Substance the same: short-term losses against any capital gains, long-term losses against long-term gains only, and no carry forward beyond eight tax years succeeding the year for which the loss was first computed.
s.2(42A)	defines “short-term capital asset” and fixes the period of holding	s.2(101), the definition of “short-term capital asset”	Same scheme: twenty-four months generally, twelve months for a security listed in a recognised stock exchange in India, units of the Unit Trust of India, units of an equity-oriented fund and zero-coupon bonds, with the same inclusion and reckoning rules. There is no inclusion rule for a buy-back.
s.2(29AA)	defines “long-term capital asset”	s.2(67), the definition of “long-term capital asset”	Same: a capital asset which is not a short-term capital asset. On the current edition of the 1961 Act, s.2(29A) is the definition of “liable to tax”, so the long-term definition is cited as s.2(29AA).
s.2(14)	defines “capital asset”	s.2(22), the definition of “capital asset”	The 2025 Act clause follows the same scheme and defines “jewellery” within its own carve-out for personal effects. That clause also provides that “property” includes any rights in or in relation to an Indian company, a wider notion than the closed list of property in s.92(5)(f), and the two are not to be conflated.
s.56(2)(x)	charges the excess of fair market value over consideration on a receipt of property	s.92(2)(m), in s.92, “Income from other sources”	Same scheme. “Property” in s.92(5)(f) is a closed list of capital assets of the assessee and includes shares and securities. For property other than immovable property the shortfall must exceed Rs 50,000 and there is no percentage band. The exclusions in s.92(3) carry no buy-back entry.
s.94(8)	ignores a bonus-stripping loss	s.175(9), with the cost-addition rule in s.175(10), in s.175, “Avoidance of tax by certain transactions in securities”	Substance the same: acquisition within three months before the record date, allotment of additional securities without payment, transfer within nine months after that date while the additional securities are retained, and the loss ignored, with the disregarded loss added to the cost of the securities retained.
s.195	withholding on any other sum chargeable, paid to a non-resident	s.393(2), Table Sl. No. 17, in s.393, “Tax to be deducted at source”	Same function, recast into one tabular withholding section. The entry covers “any other sum chargeable under the provisions of this Act” paid to a non-resident not being a company or to a foreign company, by any person, at rates in force, and Note 3(b) carries forward the extension in Explanation 2 to s.195(1).
s.115QA with s.115QB and s.115QC	the company’s own additional income-tax on distributed income on a buy-back, the interest for non-payment and the deemed default	No counterpart in the Income-tax Act, 2025, as amended by the Finance Act, 2026	No section in Chapter XIII, “Determination of tax in special cases”, sections 190 to 235, charges any tax on a company on a buy-back or on distributed income or distributed profits of any kind; the chapter’s only company-level charges fall on the company’s own total income or book profit. The Department’s navigator mapping the 1961 Act to the new Act marks sections 115-O, 115P, 115Q, 115QA, 115QB, 115QC and 115R “Redundant” with no successor section against any of them; that navigator is a Bill-stage document whose third column refers to the latest draft, and it is cited here as that document and not as the enacted numbering.
s.10(34A)	exempts income arising to a shareholder on a buy-back referred to in s.115QA	No counterpart in the Income-tax Act, 2025, as amended by the Finance Act, 2026	The 2025 Act carries its exemptions in Chapter III, “Incomes Which Do Not Form Part of Total Income”, sections 11 and 12, with the operative lists in Schedules II to VIII. Section 10(34A) has no successor anywhere in the new Act and no exemption for a receipt on a buy-back appears in those provisions. It has no row in the Department’s navigator either, the Bill-stage mapping document cited in the row above.
rule 11U of the Income-tax Rules, 1962	defines the expressions used in determining fair market value, including the valuation date	rule 56 of the Income-tax Rules, 2026, “Meaning of expressions used in determination of fair market value”	Supplies the definitions for rules 56 and 57, including “balance sheet”, “merchant banker”, “quoted shares or securities”, “registered valuer” and “valuation date”. The valuation date is fixed separately for each section served, and for s.79 it is the date on which a capital asset being a share of a company other than a quoted share is transferred.
rule 11UA, rule 11UAA and rule 11UAB of the Income-tax Rules, 1962	prescribe the methods of determining fair market value	rule 57 of the Income-tax Rules, 2026, “Determination of fair market value”	One rule of the 2026 Rules replaces all three, on the Department’s Rules navigator. A table keyed to the nature of the property. The unquoted equity share entry carries the same adjusted net asset value formula as rule 11UA(1)(c)(b), with no merchant-banker or discounted cash flow option. Serial numbers 4 and 5, the unquoted-share entries, are the only ones expressed to serve s.72; s.69 appears in no entry.
rule 11UAC and rule 11UAD of the Income-tax Rules, 1962	prescribe the classes of persons outside s.56(2)(x) and outside s.50CA respectively	rule 58 of the Income-tax Rules, 2026, “Prescribed class of persons for the purpose of section 92(3)(i) and section 79 of the Act”	One rule now serves both provisions, so the exemption power in s.79(2) has been exercised. Because rule 58 is the consolidated successor of two rules that served two different provisions, its scope is a question on its own terms and is not carried across from rule 11UAD.

Part 4 sets the buy-back against the alternatives and against the anti-avoidance machinery: buy-back, dividend or capital reduction, the SEBI route for a listed company, preference and ESOP shares, and the general anti-avoidance rule.

This note is general commentary on the law as at 08 November 2026 and is not advice on any matter. The position in a particular case depends on its own facts.