India: Stock buy-back by foreign company not taxable in India (tribunal decision)
Tax authority failed to establish that the alleged income, if any, was received, accrued, arose, or was deemed to receive, accrue or arise in India.
The Delhi Bench of the Income-tax Appellate Tribunal held that the difference between the amount paid by a foreign company to buy back shares of its stock from an Indian shareholder and the fair market value of those shares was not taxable in India under section 56(2)(viia) of the Income-tax Act, 1961.
The tribunal found that the tax authority failed to establish that the alleged income, if any, was received, accrued, arose, or was deemed to receive, accrue or arise in India. The tribunal also held that the buy-back was outside the scope of section 56(2)(viia) because the shares bought back were extinguished and never became the property of the company.
The case is: ACIT v. Gamma Pizzakraft Lanka (P) Ltd. (ITA No. 26&27/Del/2025)
Read an August 2026 report prepared by the KPMG member firm in India