Treatment of extra dividend distribution tax paid
This query is : Resolved
23 June 2016
if a co paid dividend distribution tax paid as per the provision provided in last year . but while calculating DDT payable Co found that they paid the extra amount . weather the co can adjust excess amount of DDT as advance income tax/ extra DDT paid for the next assessment year ?. or any other treatment ?
01 July 2016
please give the clarification on this
02 August 2025
When a company **pays excess Dividend Distribution Tax (DDT)** under the old regime (before it was abolished in April 2020), the treatment of the **extra DDT paid** depends on how the excess arose and the provisions applicable at the time.
### 🔍 Scenario:
* The company paid **more DDT** than what was actually payable.
* This could have been due to miscalculation, incorrect tax base, or including exempt dividends.
---
### ✅ **Key Points on Treatment of Extra DDT Paid:**
1. **No Adjustment Against Advance Tax or Other Liabilities:**
* DDT is a **separate tax liability** under Section **115-O** of the Income Tax Act.
* It is **not adjustable** against **advance income tax**, **corporate income tax**, or **carried forward** for future dividend payments.
* The Income Tax Act does **not permit** setting off excess DDT paid against any other liability.
2. **Refund of Excess DDT – Not Permitted as a Rule:**
* The **Supreme Court in the case of Godrej & Boyce Manufacturing Co. Ltd. v. Dy. CIT (2017)** held that:
> *“DDT once paid is a final tax and is not refundable, even if paid in excess.”*
* CBDT has also clarified through **various circulars** that **DDT is a final tax** and **not open to reassessment** or **rectification** unless it was paid due to a **clerical or arithmetical error**.
3. **Possible Exception – Rectification under Section 154:**
* If the excess DDT was due to a **mistake apparent from record** (like a miscalculated base or wrongly considered dividend), you may apply for a **rectification under Section 154**.
* However, such rectification is **very narrowly interpreted** and often denied.
---
### 🧾 **What You Can Do:**
* ✅ **Check whether the excess was due to a clerical error** (e.g., double counting, incorrect dividend classification). If yes:
* File a **rectification application** under **Section 154** with the Assessing Officer.
* Provide supporting documents and working papers.
* 🚫 Do **not treat the excess DDT**:
* As **advance tax** for the company’s income tax liability.
* Or as **adjustable DDT** for future years.
---
### 📌 Summary:
| Treatment Option | Permitted? | Remarks |
| --------------------------------------- | ---------- | ------------------------------------ |
| Adjust against future DDT | ❌ No | Not allowed under law |
| Adjust against income tax/advance tax | ❌ No | Separate tax stream |
| Claim refund | ❌ No | DDT is a final tax |
| Rectification u/s 154 (if error exists) | ✅ Limited | Only for clear and apparent mistakes |
---
Would you like a sample draft of a **Section 154 rectification application** if you believe the excess was due to error?
### 🔍 Scenario:
* The company paid **more DDT** than what was actually payable.
* This could have been due to miscalculation, incorrect tax base, or including exempt dividends.
---
### ✅ **Key Points on Treatment of Extra DDT Paid:**
1. **No Adjustment Against Advance Tax or Other Liabilities:**
* DDT is a **separate tax liability** under Section **115-O** of the Income Tax Act.
* It is **not adjustable** against **advance income tax**, **corporate income tax**, or **carried forward** for future dividend payments.
* The Income Tax Act does **not permit** setting off excess DDT paid against any other liability.
2. **Refund of Excess DDT – Not Permitted as a Rule:**
* The **Supreme Court in the case of Godrej & Boyce Manufacturing Co. Ltd. v. Dy. CIT (2017)** held that:
> *“DDT once paid is a final tax and is not refundable, even if paid in excess.”*
* CBDT has also clarified through **various circulars** that **DDT is a final tax** and **not open to reassessment** or **rectification** unless it was paid due to a **clerical or arithmetical error**.
3. **Possible Exception – Rectification under Section 154:**
* If the excess DDT was due to a **mistake apparent from record** (like a miscalculated base or wrongly considered dividend), you may apply for a **rectification under Section 154**.
* However, such rectification is **very narrowly interpreted** and often denied.
---
### 🧾 **What You Can Do:**
* ✅ **Check whether the excess was due to a clerical error** (e.g., double counting, incorrect dividend classification). If yes:
* File a **rectification application** under **Section 154** with the Assessing Officer.
* Provide supporting documents and working papers.
* 🚫 Do **not treat the excess DDT**:
* As **advance tax** for the company’s income tax liability.
* Or as **adjustable DDT** for future years.
---
### 📌 Summary:
| Treatment Option | Permitted? | Remarks |
| --------------------------------------- | ---------- | ------------------------------------ |
| Adjust against future DDT | ❌ No | Not allowed under law |
| Adjust against income tax/advance tax | ❌ No | Separate tax stream |
| Claim refund | ❌ No | DDT is a final tax |
| Rectification u/s 154 (if error exists) | ✅ Limited | Only for clear and apparent mistakes |
---
Would you like a sample draft of a **Section 154 rectification application** if you believe the excess was due to error?
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