Section 46A

Section 46A — the law in short

What the courts have decided on section 46A, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Cognizant Technology Solutions India P Ltd v ACIT ITATHelps departmentUnder appeal
  We repurchased shares through a court-approved scheme. Can the department still call it a dividend?
  On these facts, yes. The Chennai Tribunal held the repurchase was a colourable device — in substance a reduction of capital releasing the company's assets to shareholders — taxable as deemed dividend under s.2(22)(d), alternatively s.2(22)(a), with dividend distribution tax under s.115-O payable by the company. The High Court's sanction of the scheme conferred no tax immunity.
• Statutory position — the Finance (No. 2) Act 2024 buy-back regime: s.2(22)(f) deemed dividend from 1 October 2024 CBDT Circulars & InstructionsCuts both ways
  My client's company bought back its shares in March 2025. Does the company still pay buy-back tax, and what does the selling shareholder put in his return?
  For a buy-back that takes place on or after 1 October 2024 the company pays nothing: a proviso inserted in s.115QA(1) disapplies the 20 per cent additional tax to such buy-backs, and a proviso inserted in s.10(34A) withdraws the shareholder's exemption. Instead the whole consideration is a dividend in the shareholder's hands under the new s.2(22)(f), and a proviso to s.46A deems the value of the consideration to be nil for capital-gains purposes, so the cost of the shares comes out as a capital loss.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.