dividend distribution tax

dEAR sIR

WE ARE GOING TO FILE WITH ROC ON BEHALF OF CLIENT A COMPANY UNDER EASY EXIT SCHEME.

NOW EASY EXIT SCHEME WILL RESULT IN STRIKING OF NAME WITH ROC

IT IS NOTHING BUT LIQUIDATION

THE SHAREHOLDERS WILL GET MONEY ON LIQUIDATION.

THE COMPANY HAS SHARE CAPITAL RS.1 LAKH RESERVES OF 46 LAKH

ASSET SIDE RS.47 LAKH SHARES INVESTED IN SISTER / GROUP COS.

AS PER SECTION 2(22)C

ANY ACCUMULATED PROFITS DISTRIBUTED ON LIQUIDATION IS DIVIDEND LIABLE FOR DIVIDEND DISTRIBUTION TAX U/S 115-O [ AS RESERVES ARE RS.46 LAKHS HENCE DDT ]

AS PER SECTION 46(2)

ANY SURPLUS RECD REDUCED BY DIVIDEND WILL BE CAPITAL GAIN IN THE HANDS OF SHAREHOLDERS LIABLE FOR TAX

MY QWERY IS

AM I INTEREPRETING THE INCOME TAX ACT CORRECTLY FOR PAYMENT OF DIVIDEND DISTRIBUTION TAX U/S 115-O ?

OR IS THERE ANY OTHER PROVISION IN THE INCOME TAX STATING THAT SUCH A DIVIDEND IS TAX FREE ?

OR IT IS CAPITAL RECIEPT NOT TAXABLE IN THE HANDS OF SHAREHOLDERS ?

REGARDS

YOGESH MANTRI

Hi Yogesh,

Ur interpretation of sec 2 (22) c is correct & same is paid by company (in ur case - in kind) then it is

attracting DDT but the reserve created by ur company most probably by dividend income from group co's in wich u must check which are the subsidiaries & how much dividend is paid by such co as we can take deduction of the same for calculating the DDT liability.i may be wrong as per as interpretion is concern & i would like u to take some more advice.i would like to give u a suggestion if u go for amalgamation (which may turnout to be lendy process) u may escape paying DDT.

if i am wrong in explanation experts should guide me & yogesh

With warm regards,

Amit