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21. Amendment of section 115-O. |
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—In section 115-O of the Income-tax Act, after sub-section (1), the following sub-section shall be inserted, namely:—
"(1A) The amount referred to in sub-section (1) shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year, if—
(a) such dividend is received from its subsidiary;
(b) the subsidiary has paid tax under this section on such dividend; and
(c) the domestic company is not a subsidiary of any other company:
Provided that the same amount of dividend shall not be taken into account for reduction more than once.
Explanation.—For the purposes of this sub-section, a company shall be a subsidiary of another company, if such other company holds more than half in nominal value of the equity share capital of the company.".
Clause 21 seeks to amend section 115-O of the Income-tax Act, which relates to tax on distributed income of domestic companies.
Sub-section (1) of the said section provides, inter alia, that any amount declared, distributed or paid by such company, by way of dividends, shall be charged to additional income-tax or tax on distributed profits at the rate of fifteen per cent.
It is proposed to insert a new sub-section (1A) in the said section so as to provide that the amount of dividends referred to in sub-section (1) shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year, if—
(a) such amount of dividend is received from its subsidiary ;
(b) the subsidiary has paid tax under this section on such dividend ; and
(c) the domestic company is not a subsidiary of any other company.
The new sub-section also provides that the same amount of dividend shall not be reduced more than once. For this purpose, a company shall be a subsidiary of another company, if such other company holds more than half in the nominal value of the equity share capital of the company.
This amendment will take effect from 1st April, 2008.
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