Dividend dist tax on pvt. co.

This query is : Resolved

keya Gupta (Querist)
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13 September 2011 ABC Pvt Ltd. decalares dividend (XYZ pvt ltd. is a shareholder) and pays dividend Distr. tax
XYZ receives dividend and also declares dividend and pays dividend to PQR pvt ltd. but does not pay Dividend dist tax
PQR pvt ltd. received dividend and also declares dividend but does not pays DDT

XYZ and PQR says as dividend tax is already paid by ABC therefore, they are not liable to pay DDT again on the dividend declared by them.

IS IT Correct ?

CA Chitta Ranjan Das

CA Chitta Ranjan Das (Expert)
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13 September 2011 The DDT is payable by a domestic company on the distribution of Dividend whether it is interim dividend or final dividend and whether paid out of current profit or accumulated profit.
The cascading effect of DDT is mitigated up to one level w.e.f. 1.4.08. The DDT paid on the dividend received from its subsidiary company is deductible from the dividend declared by the holding company and DDT is payable on the net dividend. The subsidiary company means the holder of more than 50% sharecapital of other company.
However, certain conditions are required to be fulfiled by the Holding company to claim the deduction of DDT.
One of the conditions is that the assessee company is not a subsidiary company of any other company. Subject to this condition, it is settled that XYZ Ltd will have to pay DDT as it is the subsidiary of PQR Ltd but not to be paid by M/s PQR Ltd as PQR ltd is not a subsidiary company of any other company. All this interpritation is subject to the fact that the holding of XYZ Ltd and PQR Ltd is 50% or more of the share capital.

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