17. Dividend Tax—Special Provisions Relating To Tax On Distributed Profits Of Domestic Companies"[ Assessments of 'Companies']

1. Tax on distributed profits of companies [Section 115-0]

 

Through this provision an effort has been made to tax divided in the hands of dividend paying companies rather than dividend receiving shareholders. When dividend paying company is paying tax on ditributed or declared dividend then the dividend shall be exempted u/s 10 in the hands of the recipient of dividend.

 

In addition to income tax chargeable on the total income of a domestic company, where such company has declared, distributed or paid some amount by way of dividends [whether interim or final on or after 1-6-1997 but before 1-4-2002 and again from 1-4-2003 onwards whether out of current or accumulated profits, it had to pay additional income tax on the amount of dividend so declared, distributed or paid. Such tax shall be known as tax on distributed profits.

 

2. Treatment of dividend received by a domestic company from its subsidiary company [Section 115-O(1A) [Inserted by the Finance Act, 2008, with retrospective effect from Assessment Year 2008-09]

 

Any dividend received by a domestic company from its subsidiary company shall be reduced from the amount of dividend declared, distributed or paid by such domestic company during the year, if

 

(a)       Such dividend is received from its subsidiary;

 

(b)       the subsidiary has paid tax under section 115-0 on such dividend; and

 

(c)        the domestic company is not a subsidiary of any other company.

 

In other words,

 

Dividend subject  to ‘Dividend Distribution Tax’

=

Dividend declared distributed or paid during the financial year

-

Dividend received by domestic company from its subsidiary  during the financial year

 

Notes:
(i) The same amount of dividend shall not be taken into account for reduction more than once.
(ii) For the purpose of Section 1 15-O(1A), a company shall be a subsidiary of another company, if such other company holds more than half in. nominal value of the equity share capital of the company.

 

3.       Responsibility to deposit tax

 

The principal officer of such domestic comapny shall be liable to deposit tax on distributed Profits to the credit of Central Government within 14 days of the date of declaration of dividend.

 

4.       Final payment

 

The amount of tax on distributed profits deposited as per above shall be considered as final and no further credit shall be claimed by such domestic company or any other person.

 

5.       No deduction

The company or any shareholder of such company shall not have any right to claim any deduction for the amount of tax paid under this section.

 

6.       Interest payable for non-payment of tax by domestic companies [Section 115P )

 

If the Principal Officer of the company or the company fails to pay the tax under the above provisions, such person or company shall have to pay interest @ 1.25% p.m. of the tax due for the period from the last date on which tax was payable till the date of final payment.

 

7.       Assessee in default [Section 115Q]

 

In case the Principal Officer of the company or the company fails to pay the tax under the above. provisions such person or company shall be deemed as an assessee in default and the provisions relating to the recovery of tax shall become applicable.

 
 
 

More Topics..on Assessment @ Company
Company Taxation : Assessments of 'Companies'
Important Definitions : Assessments of 'Companies'
Types Of Companies : Assessments of 'Companies'
Residential Status Of A Company [Section 6(4)] : Assessments of 'Companies'
Incidence Of Tax—Scope Of Total Income : Assessments of 'Companies'
Types of incomes : Assessments of 'Companies'
Set off and Carry Forward of Losses of Companies : Assessments of 'Companies'
Carry Forward of Losses : Assessments of 'Companies'
Provisions for Losses Of Companies: Assessments of 'Companies'
Carry Forward & Set-Off Losses Of Certain Companies [Section 79]
Deductions Out Of Gross Total Income : Assessments of 'Companies'
Payment Of Tax By Certain Companies Or Minimum Alternate Tax (MAT)
Calculation of Book Profits [Explanation to Sec. 115JB(2)] : Assessments of 'Companies'
Explanation of Certain Items of Statutory Additions : Assessments of 'Companies'
Treatment of Certain Statutory Deductions : Assessments of 'Companies'
Dividend Tax—Special Provisions Relating To Tax On Distributed Profits Of Domestic Companies
Credit of Tax paid under MAT [Section 115JAA(1A)] : Assessments of 'Companies'
   
   
   
   
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