Sec.115BBDA will not be applicable in case of Income from mutual funds (whether equity oriented or not). Indeed, Association of Mutual Funds of India (AMFI) has submitted a budget proposal to finance department to clarify the same through circular or notification or through insertion in 115BBDA itself. Section 115BBDA applicable for dividend declared or distributed or paid by a Domestic company.
The definition of Domestic company as per 2(22A) means - An Indian company, or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income
Income of a Mutual fund exempt u/s.10(23D). Hence, it does not fall under category of Domestic company. Section 115BBDA applies in case of distribution by Domestic company alone. Indeed, Income from mutual fund (Equity oriented or not) is exempt in the hands of unit holder u/s.10(35). If 115BBDA provides for taxation of the same then 10(35) must provide for exception through wordings like "subject to the provisions of section 115BBDA, Income from mutual funds exempt u/s.10(35)", but no such words are found in law. Indeed, section 115O,P,Q deals with tax on distribution of dividend by domestic company. If the definition of domestic company covers mutual fund company then "Section:115R- Tax on distributed income to unit holders" become redundant. And if definition of Domestic company covers Mutual fund company also then sec.115O must provides for exception w.r.t 115R. Also, no where we have found the term "Share holder" in case of mutual funds except the term Unit holder prevails. The definition of the term Dividend u/s.2(22)(a)/(b)/(c)/(d) explains about dividend received by share holders alone (No where termed the word - Unit holder) but it is inclusive definition, hence scope for expansion possible. But prima facie, the term Unit holder absent u/s.2(22)
Hence, to conclude on - 115BBDA not applicable in case of Dividend from Equity Oriented Mutual Funds
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