During the FY .2016-17 relevant to AY 2017-18, the assessee had purchased 94,00,534 equity shares of face value of Rs. 10 each at Rs.20,297/- per share aggregating to Rs.19,080.26 Crs. from its shareholders in terms of Scheme of Arrangement and Compromise (the Scheme) u/s.391 to 393 of the Companies Act, 1956, approved by the Hon’ble High Court of judicature at Madras  vide in Company Petition No.102 of 2016 dated 18.04.2016. The Assessing Officer held that the assessee  is deemed to be assessee in default u/s.115QA of the Act, for failure to pay tax u/s.115-O of the Act, in respect of consideration paid for purchase of its own shares. The Assessing Officer held that consideration paid by the assessee to its shareholders for purchase of its own shares is nothing but reduction of capital in terms of Sections 100-104/402 of the Companies Act, 1956, and thus, the assessee is liable to pay DDT u/s.115-O of the Act. Order of the Assessing Officer was affirmed by the CIT(A). On appeal affirming the order of the CIT( A) the Tribunal held that   the consideration paid by the assessee to its shareholders for purchase of its own shares was liable to tax as deemed dividend u/s.2(22)(d) of the Act, and alternatively, u/s.2(22)(a) of the Act, and consequently, the assessee company was liable for payment of Dividend Distribution Tax (in short “DDT”) u/s.115-O of the Act. The consideration paid by the assessee to its shareholders for purchase of its own shares under the ‘Scheme of Arrangement & Compromise’ u/s.391 to 393 of the Companies Act, 1956, is nothing but dividend within the meaning of Sections 2(22)(a) / 2(22)(d) of the Act. The scheme documents make it clear that the assessee has specifically excluded the provisions of Sec.77A of the Companies Act, 1956, and claimed which is not a buyback of shares as contemplated u/s.77A of the Companies Act, 1956. Therefore, purchase of own shares through any scheme/method available u/s.391 to 393 of the Companies Act, 1956, should invariably fulfill the statutory requirements stipulated u/s.100-104 and 402 of the Companies Act, 1956. To put it in simple words, when purchase of own shares is contemplated under the provisions of Sections 391 to 393 of the Companies Act, 1956, it should be invariably to be r.w.s.100-104/402 of the Companies Act, 1956, or u/s.77A of the Companies Act, 1956, and thus, without invoking provisions of Sections 100-104/402 of the Companies Act, 1956, the provisions of Sections 391 to 393 of the Companies Act, 1956, is inoperative as far as the buyback of shares are concerned. Therefore, consideration paid by the assessee to its shareholders for purchase of own shares through a ‘Scheme of Arrangement & Compromise’ sanctioned by the Hon’ble High Court of Madras, is akin to distribution by a company of accumulated profit whether capitalized or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company, and thus, said payment is taxable as deemed dividend u/s.2(22)(a) of the Act. Alternatively consideration paid by the assessee to its shareholders for purchase of its own shares, is akin to any distribution to its shareholders by a company on the reduction of its capital to the extent to which the company possess accumulated profits which arose after the end of the previous year ending next before the first day of April, 1983 whether such accumulated profits have been capitalized or not and said transaction comes under the definition of deemed dividend as per u/s.2(22)(d) of the Act. In other words, the consideration paid by the assessee to its shareholders for purchase of its own shares is nothing but reduction of capital in terms of Sections 100-104/402 of the Companies Act, 1956, and thus, the assessee is liable to pay DDT u/s.115-O of the Act. Appeal of the  assessee was dismissed .  (ITA No.269/Chny/2022 dt. 13-9 -2023)( AY. 2017 -18)