CHAPTER XVIII
RELIEF RESPECTING TAX ON DIVIDENDS IN CERTAIN CASES
235. Relief to shareholders in respect of agricultural
income-tax attributable to dividends:-
Omitted
by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.]
236. Relief to company in respect of dividend paid out of past
taxed profits:-
1[J1] (1) Where in respect
of any previous year relevant to the assessment year commencing after the 31st
day of March, 1960, an Indian company or a company which has made the
prescribed arrangements for the declaration and payment of dividends within
India, pays any dividend wholly or partly out of its profits and gains actually
charged to income-tax for any assessment year ending before the 1st day of
April, 1960, and deducts tax there from in accordance with the provisions of
Chapter XVIIB, credit shall be given to the company against the income-tax, if
any, payable by it on the profits and gains of the previous year during which
the dividend is paid, of a sum calculated in accordance with the provisions of
sub-section (2), and, where the amount of credit so calculated exceeds the
income-tax payable by the company as aforesaid, the excess shall be refunded.
(2) The amount of income-tax to be given as
credit under sub-section (1) shall be a sum equal to ten per cent of so much of
the dividends referred to in sub-section (1) as are paid out of the profits and
gains actually charged to income-tax for any assessment year ending before the
1st day of April, 1960.
Explanation 1.—For the purposes of this section, the aggregate of the
dividends declared by a company in respect of any previous year shall be deemed
first to have come out of the distributable income of that previous year and
the balance, if any, out of the undistributed part of the distributable income
of one or more previous years immediately preceding that previous year as would
be just sufficient to cover the amount of such balance and as has not likewise
been taken into account for covering such balance of any other previous year.
Explanation 2.— The expression
"distributable income of any previous year" shall mean the total
income 2[J2] [(as computed before making any deduction under Chapter
VIA)] assessed for that year as reduced by—
(i) The
amount of tax payable by the company in respect of 3[J3] [its] total incomes;
(ii) the amount of any other
tax levied under any law for the time being in force on the company by the
Government or by a local authority in excess of the amount, if any, which has
been allowed in computing the total income;
4[J4] [(iii) any sum with reference to which a deduction is
allowable to the company under the provisions of section 80G; and]
(iv) In the case of a banking company, the amount actually transferred to a
reserve fund under section 17 of the Banking Companies Act, 19495[J5] (10 of 1949),
And as increased by—
(a) Any profits and gains or
receipts of the company, not included in its total income 6[J6] [(as computed before making any deduction under Chapter
VIA)]; and
(b) Any amount attributable to
any allowance made in computing the profits and gains of the company for
purposes of assessment, which the company has not taken into account in its
profit and loss account.
1[J7] [236A.
Relief to certain charitable institutions or funds in respect of certain
dividends:-
(1)
2[J8] [Where seventy-five per cent of the share capital of any
company is throughout the previous year beneficially held by an institution or
fund established in India for a charitable purpose the income from dividend
whereof is exempt under section 11], credit shall be given to the institution
or fund against the tax, if any, payable by it, of a sum calculated in
accordance with the provisions of sub-section (2), in respect of its income
from dividends (other than dividends on preference shares) declared or
distributed during the previous year relevant to any assessment year beginning
on or after the 1st day of April, 3[J9] [1966] 4[J10] [by such a company],
and where the amount of credit so calculated exceeds the tax, if any, payable
by the said institution or fund, the excess shall be refunded.
5[J11] [(2) The amount to be given as credit under
sub-section (1) shall be a sum which bears to the amount of the tax payable by
the company under the provisions of the annual Finance Act with reference to
the relevant amount of distributions of dividends by it the same proportion as
the amount of the dividends (other than dividends on preference shares)
received by the institution or fund from the company bears to the total amount
of dividends (other than dividends on preference shares) declared or
distributed by the company during the previous year.
Explanation.—in sub-section
(2) of this section and in section 280ZB, the expression "the relevant
amount of distributions of dividends" has the meaning assigned to it in
the Finance Act of the relevant year.]]
[J1]See rule 27.
[J2]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[J3]Substituted for "the said", ibid.
[J4]Substituted for "(iii) the amount paid to any charitable institution or fund to the extent to which it is exempt from tax under section 88; and" by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Earlier, it was amended by the Finance Act, 1965, w.e.f. 1-4-1965.
[J6]Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968.
[J7]Inserted by the Direct Taxes (Amendment) Act, 1964, w.e.f. 1-4-1964.
[J8]Substituted for "In the case of an institution or fund referred to in clause (iii) of sub-section (2) of section 104" by the Finance Act, 1987, w.e.f. 1-4-1988.
[J9]Substituted for "1964" by the Finance Act, 1966, w.e.f. 1-4-1966.
[J10]Substituted for "by such a company as is referred to in the said clause" by the Finance Act, 1987, w.e.f. 1-4-1988.
[J11]Substituted by the Finance Act, 1966, w.e.f. 1-4-1966.