Section 148 — Deduction in respect of certain inter-corporate dividends. Successor to s.80M of the 1961 Act.
Section 148 is in Chapter VIII — Deductions to Be Made in Computing Total Income, which runs from section 122 to section 154.
Sub-section (1) applies where the gross total income of a domestic company includes dividend income from another domestic company, from a foreign company or from a business trust. It allows that company a deduction equal to so much of that dividend income as does not exceed the dividend it has itself distributed at least one month before the due date for filing its return of income under section 263(1). Sub-section (2) provides that once an amount of distributed dividend has been used to support a deduction in one tax year, no deduction can be claimed in respect of the same amount in any other tax year.
The provision removes the second layer of tax on a dividend that a company merely passes through, but only to the extent it actually passes it through, and only if it does so before the return deadline. Sub-section (2) prevents the same onward distribution being counted twice across years.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Deadline for the company's own distribution to count | At least one month before the due date for filing the return of income under section 263(1) | A distribution made later than that, even if before the due date itself, does not support the deduction | 148(1) |
| Amount of the deduction | So much of the dividend income as does not exceed the dividend distributed by the company | The onward distribution, not the dividend received, sets the ceiling | 148(1) |
The deduction is the smaller of the dividend received and the dividend the company itself declares and distributes, and it is lost to the extent the company retains the money. The distribution has to be a clear month ahead of the section 263(1) due date, so the decision to distribute cannot be left until the return is being prepared. Keep track of which distribution has been set against which year's dividend income: sub-section (2) prevents the same distributed amount being used again in another year.
A domestic company receives a dividend of Rs. 5 crore from another domestic company and itself distributes Rs. 3 crore to its shareholders two months before the due date for its return under section 263(1). The deduction is Rs. 3 crore, not Rs. 5 crore — sub-section (1) caps it at the amount the company has itself distributed, so Rs. 2 crore of the receipt stays taxable. Had that same Rs. 3 crore gone out a fortnight before the due date, it would have been inside the due date but outside the section, which requires distribution at least one month before it. And once the Rs. 3 crore has supported a deduction in this year, sub-section (2) shuts it out of any other tax year.
In the domestic company’s return, as a deduction against dividend income included in gross total income, and in the assessment that checks the date and amount of its own declared dividend against the section 263(1) due date. Because the qualifying distribution must precede that due date by a month, the deduction is effectively settled before the return is filed rather than argued afterwards.
as does not exceed the amount of dividend distributed by it at least one month before the due date for filing the return of income under section 263(1)
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