Chapter VII Special Provisions Relating To Tax On Distributed Profits Of Domestic Companies

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The Tax PublishersSection C PART B DIVIDEND DISTRIBUTION TAX CHAPTER VII SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES 109. Tax on distributed profits of domestic companies (1) Every domestic company shall be liable to pay tax on any amount of dividend declared, distributed or paid (whether interim or otherwise) to its shareholders, whether out of current or accumulated profits. (2) The tax on the dividend shall be charged at the rate specified in Paragraph B of the Second Schedule, on the amount referred to in sub-section (1). (3) The amount referred to in sub-section (1) shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year, if-- (i) such dividend is received from its subsidiary; and (ii) the subsidiary has paid tax under this section on such dividend. (4) The domestic company or the principal officer of such company responsible for making payment of the dividend, as the case may be, shall be liable to pay the tax on dividend to the credit of the Central Government within a period of fourteen days from the date of declaration, distribution or payment of such dividend, whichever is earliest. (5) No deduction under any other provision of this Code shall be allowed to the domestic company or a shareholder in respect of the dividend charged to tax or the tax thereon. (6) The tax on dividend so paid by the domestic company shall be treated as the final payment of tax in respect of the dividend declared, distributed or paid and no further credit shall be claimed by the domestic company or by any other person in respect of the tax so paid. (7) If the domestic company or, as the case may be, the principal officer of such company responsible for making payment of the dividend does not pay the tax in accordance with the provisions of this section, then, it or he shall be deemed to be an assessee in default in respect of the tax payable by it or him and the provisions of this Code relating to the collection and recovery of tax shall apply. (8) If the domestic company or, as the case may be, the principal officer of such company fails to pay the whole or any part of the tax on dividend referred to in sub-section (2), within the time allowed under sub-section (4), then, it or he shall be liable to pay simple interest at the rate of one per cent. for every month on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid. (9) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of Part A of this Code, the tax on dividend declared, distributed or paid under sub-section (1) shall be payable by such company. (10) In this section,-- (a) a company shall be a subsidiary of another company if such other company holds more than fifty per cent. of nominal value of the equity share capital of the company; (b) 'dividend' shall not include any payment referred to in item (e) of sub-clause (I) of clause (81) of section 314. FROM NOTES ON CLAUSES Clause 109 is the only clause of Part B and Chapter VII of the Bill and deals with tax on distributed profits of domestic companies or dividend distribution tax. The said clause provides that every domestic company shall be liable to pay tax on the amount of dividend declared, distributed or paid (whether interim or otherwise) to its shareholders, whether out of current or accumulated profits. The dividend distribution tax shall be charged on the dividend declared, distributed or paid at the rate specified in Paragraph B of the Second Schedule to the Bill. The said clause further provides that the dividend on which the tax is to be levied shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year if-- (i) such dividend is received from its subsidiary; and (ii) the subsidiary has paid tax under this clause on such dividend. The said clause also provides that the the tax on dividend shall be paid to the credit of the Central Government within fourteen days from the date of declaration, distribution or payment of such dividend, whichever is earliest. The clause also provides that the dividend distribution tax paid by the domestic company shall be treated as the final payment of tax in respect of the dividend declared, distributed or paid and no further credit shall be claimed by the domestic company or by any other person in respect of such tax. Further, no deduction on the amount of dividend charged to tax or the tax paid shall be allowed either to the company or to the shareholder. The clause further provides that if the domestic company or the principal officer of such company fails to pay the whole or any part of the dividend distribution tax within a period of fourteen days then, it or he shall be deemed to be an assessee in default and also be liable to pay simple interest at the rate of one per cent. for every month or part thereof on the amount of such tax for the period of default. The clause also defines the terms 'subsidiary company' and 'dividend'. SUBSCRIBE FOR FULL CONTENT

The Tax PublishersSection C
PART B
DIVIDEND DISTRIBUTION TAX
CHAPTER VII
SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES

109. Tax on distributed profits of domestic companies

(1) Every domestic company shall be liable to pay tax on any amount of dividend declared, distributed or paid (whether interim or otherwise) to its shareholders, whether out of current or accumulated profits.

(2) The tax on the dividend shall be charged at the rate specified in Paragraph B of the Second Schedule, on the amount referred to in sub-section (1).

(3) The amount referred to in sub-section (1) shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year, if--

(i) such dividend is received from its subsidiary; and

(ii) the subsidiary has paid tax under this section on such dividend.

(4) The domestic company or the principal officer of such company responsible for making payment of the dividend, as the case may be, shall be liable to pay the tax on dividend to the credit of the Central Government within a period of fourteen days from the date of declaration, distribution or payment of such dividend, whichever is earliest.

(5) No deduction under any other provision of this Code shall be allowed to the domestic company or a shareholder in respect of the dividend charged to tax or the tax thereon.

(6) The tax on dividend so paid by the domestic company shall be treated as the final payment of tax in respect of the dividend declared, distributed or paid and no further credit shall be claimed by the domestic company or by any other person in respect of the tax so paid.

(7) If the domestic company or, as the case may be, the principal officer of such company responsible for making payment of the dividend does not pay the tax in accordance with the provisions of this section, then, it or he shall be deemed to be an assessee in default in respect of the tax payable by it or him and the provisions of this Code relating to the collection and recovery of tax shall apply.

(8) If the domestic company or, as the case may be, the principal officer of such company fails to pay the whole or any part of the tax on dividend referred to in sub-section (2), within the time allowed under sub-section (4), then, it or he shall be liable to pay simple interest at the rate of one per cent. for every month on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.

(9) Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of Part A of this Code, the tax on dividend declared, distributed or paid under sub-section (1) shall be payable by such company.

(10) In this section,--

(a) a company shall be a subsidiary of another company if such other company holds more than fifty per cent. of nominal value of the equity share capital of the company;

(b) 'dividend' shall not include any payment referred to in item (e) of sub-clause (I) of clause (81) of section 314.

FROM NOTES ON CLAUSES

Clause 109 is the only clause of Part B and Chapter VII of the Bill and deals with tax on distributed profits of domestic companies or dividend distribution tax. The said clause provides that every domestic company shall be liable to pay tax on the amount of dividend declared, distributed or paid (whether interim or otherwise) to its shareholders, whether out of current or accumulated profits. The dividend distribution tax shall be charged on the dividend declared, distributed or paid at the rate specified in Paragraph B of the Second Schedule to the Bill.

The said clause further provides that the dividend on which the tax is to be levied shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year if--

(i) such dividend is received from its subsidiary; and

(ii) the subsidiary has paid tax under this clause on such dividend.

The said clause also provides that the the tax on dividend shall be paid to the credit of the Central Government within fourteen days from the date of declaration, distribution or payment of such dividend, whichever is earliest.

The clause also provides that the dividend distribution tax paid by the domestic company shall be treated as the final payment of tax in respect of the dividend declared, distributed or paid and no further credit shall be claimed by the domestic company or by any other person in respect of such tax. Further, no deduction on the amount of dividend charged to tax or the tax paid shall be allowed either to the company or to the shareholder.

The clause further provides that if the domestic company or the principal officer of such company fails to pay the whole or any part of the dividend distribution tax within a period of fourteen days then, it or he shall be deemed to be an assessee in default and also be liable to pay simple interest at the rate of one per cent. for every month or part thereof on the amount of such tax for the period of default.

The clause also defines the terms 'subsidiary company' and 'dividend'.