Section 115QA – Rules prescribed vide Notification no. 94/2016 dated 17.10.2016 for determining the amount received by the company for issue of shares – Rules to be applicable for buyback effected on or after 01.06.2016
As per the amendment to Explanation (ii) to section 115QA(1), (effective from 1.6.16), consideration received by company on issue of shares to be bought back is to be determined as per the Rules to be prescribed. Thereafter, Notification No 94/2016, dated 17.10.2016 inserted Rule 40BB to specify rules pertaining to amount received by the company in respect of issue of share applicable w.r.e.f. 1.6.2016. An issue arises as to whether these rules can be applied only for buyback of shares taking place after 1st June 2016, or whether the same can be applied even for buyback of shares prior to 1st June 2016.
It is suggested that it may be explicitly provided that the specified rules, notified via Notification No 94/2016, dated 17.10.2016, shall be applicable only for computing consideration received on issue of shares in respect of buy back which takes place on or after 1st June 2016. Further, necessary provision may be incorporated so that the cost paid for intermediate transfers between the shareholders post issue of share by the company is reduced for the purpose of calculating the buyback tax.