Polycab India Limited Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that dividend paid to International Finance Corporation is exempt from Dividend Distribution Tax chargeable under section 115-O of the Income Tax Act. Accordingly, appeals of assessee allowed.
Facts- The sole issue involved is whether ld. AO is justified in claiming the refund in respect of dividend distribution tax paid u/s.115-O(1) on dividend paid to international finance corporation which has the immunity under the Income Tax Act by virtue of Section 9 of Article VI of the International Finance Corporation Act (IFC), 1958.
Conclusion- Held that dividend distribution companies have to pay DDT u/s. 115O (1) of the Act, which is an additional tax on the company at the point of dividend disbursal, rather than as a tax on the recipient shareholder per se. However, nuanced and purposive reading of the statute reveals that this levy of tax is not intended to apply in discriminatory, particularly in case where recipient IFC enjoys unequivocal statutory immunity from taxation in India. Where the shareholder in question is cloaked with comprehensive exemption under the Income Tax Act, then such exemption is not merely limited to income but it extends in its full amplitude to the IFC’s assets, property, operations, transactions and all manifestation of financial activity. The denial of reduction of the amount of dividend paid to IFC from the computation of the amount of dividend paying company will lead to anomaly as the company is paying additional tax on the dividend paid to an entity which is beyond the taxing ambit in India. To permit taxation of a transaction vis-à-vis wholly taxed immune entity, even indirectly on the dividend disbursing company will violate the legislative intent that enshrines such immunity. Thus, Sub-Section 1A of Section 115O assumes particular salience, as it expressly contemplates the reduction of amounts paid to exempt entities from the dividend amount liable to be DDT.
