1) Deductions u/s 80M is a Deduction not an exemption. The very basic difference between exemption & deduction is that losses from the sources of income which is otherwise exempted had no tax treatment & however losses from a income which a allowed as deduction shall have tax treatment in accordance with the provisions of Chapter VI.
2) When Dividend is received by domestic Company from other domestic Company or Foreign company or business trust ,then the question of applicability of section 80M comes into picture.
3) It means if A limited received dividend from B Inc , then also Section 80M will apply.
4) if A limited received dividend from domestic Company B limited, & A limited declared the dividend to the following person and date of distribution is as follows .Analysis :,
* Mr John (USA), dividend declared on 30/03/2020 & distributed on 02/04/2020 – Section 80M apply , since the section contemplates Dividend distributed on or after 01/04/2020.
Further it’s hardly matters who is the recipients
* Dividend declared on 30/09/2021 & distributed on 02/10/2021 – Section 80M shall not apply , since dividend must be distributed one months prior to the date of filing of ROI us 139(1) .since from Finance act , the due date us 139(1) is 31st October of Assessment year.
4) Dividend received by A Limited from its Foreign subsidiary in which it holds Equity shares of 30% . This Dividend is taxable in the hands of the indian Company us 115BBD @ gross rate of 15%.
However, while calculating the deduction us 80M , this Dividend shall be reduced & allowed as deduction to the extent of dividend distributed by indian companies. Suppose A limited received dividend form foreign specified company in which it should hold more than 26%, & distributed dividend to its shareholders as follows, Assume received date from foreign company in all the case is 31st January 2021 & distribution date is 28th March 2021
|Dividend Received by indian companies||Dividend paid by indian companies||Deduction us 80M available||Balance dividend taxable us 115BBD|
|Rs 20,00,000||Rs 20,00,000||Rs 20,00,000||Rs Nil|
|Rs 20,00,000||Rs 25,00,000||Rs 20,00,000||Rs Nil|
|Rs 20,00,000||Rs 12,00,000||Rs 12,00,000||Rs 8,00,000|
|Rs 20,00,000||Rs Nil||Rs Nil||Rs 20,00,000|
5) A limited declared the interim dividend to B limited on 01/07/2021 related to financial year 21-22 of Rs 75,000/-
B limited declared dividend as follows –
1) on 01/08/2021 final dividend for the year Financial year 20-21 of Rs 40,000/-
2) on 12/09/2021 interim dividend of financial year 21-22, Rs 55,000/-.
Compute the deduction us 80M for B limited for AY 21-22
Ans – Dividend income earned by the company shall actually belongs to the year for which such Dividend declared is related to.
In the given case, dividend of Rs 75,000/- shall be taxable for the AY 22-23
Further Section 80 M which talks about the concept due date. Such due date is only applicable when the dividend is distributed by indian company. However Deduction us 80M to the extent it is received from indian company , must be belong to the previous year for which such due date is applicable.
Hence, in the given case, while calculating the deduction us 80M , Dividend received by B limited from A limited of Rs 75,000/- shall not be taken into account for AY 21-22
However , such Dividend shall be taken into account while calculating the deduction us 80M for AY 22-23 to the extent of Rs 55,000/-.
Note – even if such Dividend is distributed by B limited on 31/10/2021 instead of 12th September 2021, then also Deductions us 80M to the extent of Rs 55,000/- shall be allowed , since the due date of 31/10/2021 shall be applicable when deductions us 80M is claimed for the prospective of AY 21-22.
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For the benefits of reader a short glimpse of provisions is presented in my personal language as per my capabilities. It shall not to be used for any legal advice /opinion and shall not to be used to rendering any professional opinion. Readers are advised to kindly go through to original government publications and published case laws and judicial pronouncements. Errors may creep in and hence it will be highly appreciable to highlight such errors or providing suggestions for effective improvements.