section 2(22)c

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CA Devanshi Gandhi (Ajani) (Querist)
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24 March 2010 if company does't pay DDT than whether department can treat such dividend as shareholder's income or not?? one of my client is a shareholder in a company which is in a process of liquidation, company has paid some money but still DDT is not paid??
so can i show this income as divided u/s 2(22)c and can claim exemption u/s 115-O for AY 10-11??

Anurag Agarwal

Anurag Agarwal (Expert)
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24 March 2010 The department cannot consider the same as the Income in the hands of the share holder.

But u will have ensure that the amount is covered within the limits of Section 2(22)(C)
As per which:-
any distribution made to the shareholders of a company on its liquidation, is to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation
Conclusion: You can show his income within the limits of section(22)(C) and can claim exemption under section 10(34)

Anurag Agarwal

Anurag Agarwal (Expert)
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24 March 2010 Resolved

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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24 March 2010 Dividend is an income in the hands of the share holder as per section 2(24)(ii) of the Income tax Act,1961. However, it is an excluded income in the hands of the share holder vide exemption under section 10(34) provided tax on distributed profits is paid by the company vide section 115 O. Since in the given case, tax on distributed profits is not paid by the company and hence section 56(2)(i) attracts and the dividend is taxable in the hands of the share holder.