The Tata Power Company Limited Vs ACIT
[ITA No. 4497/M/2008
Dated- 9 September 2011
(AY: 2001- 02)]
The Tribunal ruled in the Tax Authority’s favor and held that the Taxpayer was not entitled to refund of Dividend Distribution Tax ( DDT) for the following reasons:
- The Tribunal reiterated that the incidence of liability to pay DDT arises the moment such dividend is distributed (declared) and any subsequent events can have no bearing on such liability, even if such event renders dividend non-taxable in the hands of the recipient.
- It was not possible to extend the same analogy laid down by the cases cited pertaining to taxability of dividend in the hands of shareholder to a case of refund of DDT already paid by the Company declaring dividend.
- The payment of DDT is not dependant on the ultimate chargeability to tax in the hands of the recipient of the dividend.
- The HC rulings relied on by the Taxpayer are distinguishable. Non-chargeability of dividend in the hands of the shareholder cannot be equated with the cessation of DDT liability in the hands of the Taxpayer.Thus, the Tax Authority rightly rejected the Taxpayer’s claim for refund of DDT.
- The Tribunal has held that the liability to pay DDT would persist regardless of the fact that the dividend was declared but was not actually paid due to amalgamation.
- The Tribunal’s ruling is based on the provisions of Section 115-O of the Act, which provides that the DDT liability arises on any amount declared, distributed or paid as dividend. As soon as dividend is declared, the DDT becomes payable and such amount cannot be refunded even if the dividend is not ultimately paid.