80M. [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
Balmer Lawrie Investments Ltd [BLIL], a BSE listed entity, is holding around 62% in Balmer Lawrie & Co.Ltd[BL].So BLIL was not paying any tax if it paased the amount equal to whatever it received from its holding company BL, as the latter used to pay the DDT.
NOW. as per NEW BUDGET provisions, will the dividend income for BLIL from BL, will increse the income tax liability of BLIL and hence it will reduce its dividend pay out?
OR BLIL will not have to pay any DDT to the extent it receives from its subsidiary BL ?
As per recent amendment in Finance Bill, 2020, dividend amount is taxable in the hands of shareholders as per the rate applicable on them and company is not liable to pay dividend distribution tax at the time of distribution of dividend under section 115-O. In the Finance Bill, 2020 a new section is inserted “Section 80M – Deduction in respect of certain inter-corporate dividends”. As per this new section if a domestic company(X Ltd.) received dividend from other domestic company(Y Ltd.) then a deduction equal to the dividend amount is allowed in this section but it cannot exceed the dividend amount distributed by the other company(Y Ltd.) on or before the due date u/s 139(1).
In the given case first of all dividend income is taxable in the hands of BLIL. As per section 80M, deduction equal to dividend amount is allowed to BLIL but it cannot exceed the dividend amount distributed by BL on or before due date u/s 139(1). Hence, dividend will be taxable in the hands of shareholder of BLIL.
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