The Jaipur bench of the ITAT on Thursday ruled that Dividend Distribution Tax (DDT) under section 115O of the Income Tax Act, 1961 is chargeable only when the dividend is declared, distributed or paid and it cannot be brought to tax in a differrent year merely due to mistake committed by Assessee.
when the assessee has brought on record the relevant evidence to show that the dividend was actually declared on 28.09.2010 then this cannot be charged to tax u/s 115 O in the year under consideration merely on the basis of mistakes committee by the assessee.
Assessee, a Company engaged in the business of manufacturing stainless Steel Wires and Iron Ropes, filed e-return for the year 2010-11. The return was processed by CPC, Bangalore who demanded Dividend Distribution Tax (DDT). Subsequently, assessee filed a rectification application claiming that no dividend has been paid in the previous year relevant to the assessment year under consideration. According to them, the dividend has been paid in the previous year. AO, however, rejected the claim by stating that in the balance sheet ending on 31.03.2010 the assessee has shown the dividend declared of Rs. 1,95,00,000/-. The AO held that the dividend was declared for the F.Y. 2009-10 and therefore, the liability to pay DDT arise in the A.Y. 2010- 11.
Analyzing the provisions of section 8 with section 115O of the Income Tax Act, the Tribunal noted that the DDT is chargeable only when the dividend is declared, distributed or paid whichever is earlier and not prior to that.
Citing a catena of decisions, the bench noted that it is settled proposition of law that DDT is chargeable only in the year when it is declared, distributed or paid and not prior to that.
The bench considered the fact that the Board of Directors in the meeting held on 28.08.2010 proposed the dividend which was later approved by the shareholders in the Annual General Meeting held on 29.09.2010. Though the assessee has shown the dividend liability in the balance sheet for the F.Y. 2009-10 relevant to the A.Y. 2010-11 however, when this fact is not disputed by the authority below that the dividend in question was proposed on 28.08.2010 which was finally declared on 29.09.2010 and paid on 01.10.2010 then the instance of chargeability of dividend distribution tax arises only on declaration of dividend on 28.09.2010 which is prior to the date of payment on 01.10.2010.
“Therefore, the liability on account of DDT would arise only in the A.Y. 2011-12 and not in the A.Y. 2010-11. Though the assessee has committed various mistakes in giving the details in the return of income as well as in the challan under which the tax was paid regarding the date of payments, the date of distribution however, when the assessee has brought on record the relevant evidence to show that the dividend was actually declared on 28.09.2010 then this cannot be charged to tax u/s 115 O in the year under consideration merely on the basis of mistakes committee by the assessee.”
Read the full text of the Order below.
