section 2(22)c

This query is : Resolved

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??

Anurag Agarwal

Anurag Agarwal (Expert)
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24 March 2010 First of all the company cannot pay dividend without paying DDT & if it does than it is not the mistake of the shareholder, thus the Income will continued to be exempted in his hands under section 10(34)of the Income tax ACt.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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24 March 2010 Company can pay dividend even without paying tax on distributed profits. If they do so the penal consequences as in chapter X11D of the Income tax Act,1961 will follow.
In the shareholders hand such dividend is taxable since exemption under section 10(34) will be lost since exemption mentioned in that section is for dividend referred in section 115O.

Anurag Agarwal

Anurag Agarwal (Expert)
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24 March 2010 As per my opinion
Penalty is leviable equal to the amount of tax that should have been deducted under section 271C which is under chapter XXI of the Income Tax Act.

Further interest shall be payable under --section 115P (Interst being compensatory in nature and not in penal nature)
--Section 115Q says that the princple officer shall be deemed to be in defalut and will be proceeded for recovery.

Further dividend will remained to be exempted in shareholder hand because there cannot be double taxation of the Income as tax cannot be recovered both from the company/principle officer and from the shareholder.
To Add:
Section 10(34)is applicable to the dividend covered under 115O, it doesnot states that if company doesnt comply with 115O the liability will fall on the Shareholder.

Any further clarification is Welcomed with open hands

CA Devanshi Gandhi (Ajani)

CA Devanshi Gandhi (Ajani) (Querist)
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24 March 2010

CA Devanshi Gandhi (Ajani)

CA Devanshi Gandhi (Ajani) (Querist)
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24 March 2010 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??

CA Vijay Kumar Gupta

CA Vijay Kumar Gupta (Expert)
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24 March 2010 DIVIDEND IS SPECIFICALLY EXEMPT U/S 10(34)IN THE HANDS OF SHAREHOLDER. IT IS FAULT OF THE COMPANY FOR WHICH SHAREHOLDER CANNOT BE TAXED.

Anurag Agarwal

Anurag Agarwal (Expert)
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24 March 2010 If the Amount which your client has received is covered under the limit as defined under section 2(22)(c) then to that extent it will be definatly exempt.

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