More Stories

Informist, Friday, Apr. 17, 2026

 

NEW DELHI – The Delhi High Court has ruled that buyback of shares by companies is reduction of capital and not acquisition of assets, and so such a transaction will not result in addition of "income" even if the shares are brought below the fair market price. Therefore, no income tax can be levied on such buyback transactions by companies, it said.

 

The case arose from Globe Capital Market Ltd. buying back 2.9 million shares at INR 313.40 per share for an aggregate INR 897.11 million in the assessment year 2018-19 (Apr-Mar). The company's share price at the time was INR 370.46. The income tax department said the buyback had resulted in acquisition of property and constituted a capital asset. Since the shares were purchased at a rate lower than the market value, the difference was liable to be added to Globe Capital's income, it had said.

 

The court said securities or shares of a company can in a given case be property in the hands of a corporate entity, but for the issuing company it is merely a certificate issued to members with respect to the contribution they have made towards its capital. Buyback of shares essentially means reduction of the company's capital, which is not permissible without taking recourse to Section 68 of The Companies Act, 2013, it said.

 

Section 68(vii) of The Companies Act says that after the completion of a buyback, the company has to extinguish the shares or securities bought back, which means the company's share capital is being reduced, the court said. One cannot be taxed for so-called deemed profit from property or shares that accrue on destruction of that very property, it said. Once the shares are bought back, the purported property vanishes, it said.

 

The court upheld the Income Tax Appellate Tribunal's order that said Globe Capital's buyback of shares was not an income and hence no tax could be levied on it. The argument that Globe Capital had acquired an asset at a lesser rate than the fair market value has "no legs to stand on", the court said. Buyback of one's own shares is the antithesis of buying an asset, it said.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.