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TMI Blog2024 (3) TMI 726X X X X Extracts X X X X X X X X Extracts X X X X ..... e prescribed under the Companies Act and approval from the Registrar of Companies was also taken; income distribution tax on buyback u/s 115QA was duly paid; the creditworthiness is established from the financials of UMS i.e. Balance Sheet at 31.03.2017, 30.11.2017 and 31.03.2018 of UMS and Knaup Management Services Pvt. Ltd. ( KMS ) which is 100% wholly owned subsidiaries of UMS and lastly, Valuation Report of UMS and KMS etc. under Rule 11UA of the Income Tax Rules, 1962. We endorse the findings of the Ld. CIT(A) that income arising to the assessee shares-holder as a result of buyback is exempt u/s 10(34A) of the Act by virtue of amendment brought on the statute book by the Finance Act, 2013 w.e.f. 01.04.2014. Accordingly, we sustain the order of the Ld. CIT(A) and reject the appeal of the Revenue. - Dr. BRR Kumar, Accountant Member And Ms. Astha Chandra, Judicial Member For the Department : Shri Sanjay Kumar, Sr. DR For the Assessee : None ORDER PER ASTHA CHANDRA, JM The appeal filed by the Revenue is directed against the order dated 04.07.2022 of the Ld. Commissioner of Income Tax (Appeals)-42, Delhi [ Ld. CIT(A) ] pertaining to Assessment Year ( AY ) 2018-19. 2. The Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of valuation report, it was observed that at the time of valuation, the books value of M/s Knaup Management Services Private Limited is Rs. 3,45,50,000/-. The KMS owns a commercial property at plot No. 80, Sector-32, Gurgaon, Haryana-122001 thereafter made the valuation of KMS. The valuation has done on 06.11.2017 and enhance the value of property by making valuation report amounting to Rs. 87,35,55,420/-.Further, made the valuation of KMS on 30.11.2017 and enhance the book value of assets of KMS amounting to Rs. 88,62,55,291/-. On the same date, valuation was done of Uday Management Services Pvt. Ltd and increased the book value of assets amounting to Rs. 92,78,29,212/-. Uday Management Services Pvt. Ltd is wholly owned subsidiary company of M/s Knaup Management Services Private Limited. Later on, the Board Meeting was held on 04/12/2017 for Buy Back and the same was approved by the members on 05.12.2017 to buy back of 82 equity share @ Rs. 6,07,500/- per equity share. Thereafter, company has declared the dividend on 11.12.2017 15.02.2018 resultant dividend received to the assessee. The assessee received buy back amount to Rs. 2,34,48,938/- is not genuineness. So the Buy bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act. 8.2 It was contended that it was a simple case of buy back of shares which is exempt from tax under section 10(34A) of the Act in the hands of the shareholder and the company had duly paid taxes of Rs 1,14,93,317/- under section 115QA of the Act (tax on distributed income to shareholders by way of back of shares) on such buy back. It was argued that the action of the AO is unjustified and against the provisions of the law as the provisions of section 68 were not applicable in the facts of the case. 9. As per section 68 of Income Tax Act, 1961, any sum found credited in the books of accounts of an assessee, for which he offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, may be charged to income tax as the income of the assessee of that year. 9.1 It is trite that for invoking provisions of section 68 and thus treating an amount credited in the books of accounts as unexplained, the necessary ingredients are that either the identity of creditor is not established; or credit worthiness established; or the genuineness of the transaction is not proven of the cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertinent to note that the amount was paid by UMS for the buyback of its shares for which UMS also paid Rs. 1,14,93,317/- tax under section 115QA of the Act. As per section 10(34A) of the Act, any income arising to an assessee, being a shareholder, on account of buyback of shares by the company as referred to in section 115QA is exempt from tax. 9.8 Thus, it is observed that it was a clear case of buyback of shares and section 68 does not apply to a case of buy back of shares. As in this case, the identity of UMS is established. The genuineness of the transaction is established as buyback was carried out as per the procedure prescribed under the Companies Act and approval from the Registrar of Companies was also taken for the same, and income distribution tax on the buyback under section 115QA was duly paid. The creditworthiness is established from the financials of UMS i.e. Balance Sheet of UMS KMS as at 31.03.2017. 30.11.2017 and 31.03.2018; and Valuation Report u/r Rule 11UA of UMS KMS etc. 9.9 It is also observed that UMS also paid dividend during the year twice. Rs 2,00,00,000/- was paid on 15.12.2017, out of which Rs. 1,12,00,000/- was received by the appellant. The company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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