My client is an SEZ developer and paid no DDT on dividends declared out of current income. The Assessing Officer says the exemption was withdrawn. When did it go, and are there other carve-outs I should be looking at?
Section 115-O(6) exempted from tax on distributed profits any amount declared, distributed or paid on or after 1 April 2005 out of its current income by an undertaking or enterprise engaged in developing, or developing and operating, or developing, operating and maintaining a Special Economic Zone, in the hands of the developer or enterprise or the person receiving the dividend — but its proviso says in terms that the provisions of that sub-section shall cease to have effect from 1 June 2011. Two other carve-outs sit alongside it and are still worth checking for a pre-2020 year: sub-section (7) for a specified domestic company distributing to a business trust out of current income on or after the specified date, and sub-section (8) for a company that is a unit of an International Financial Services Centre deriving income solely in convertible foreign exchange, on amounts declared on or after 1 April 2017 out of current income or income accumulated as such a unit after 1 April 2017.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2020-04-01, reported as Income-tax Act, 1961, s.115-O(6), (7) and (8), as printed on the departmental page stamped Year: 2026. It bears on section 115-O(6), section 115-O(7), section 115-O(8), section 115-O, section 2(13A), section 10(23FC) of the Income Tax Act 1961, in Capital Gains Exemptions and How Tax Law Is Read matters.
The SEZ exemption is the one that generates the assessments, because the sunset is written into the sub-section itself and the two limbs of it are easy to conflate. The exemption ran only to dividend declared, distributed or paid on or after 1 April 2005 and, by force of the proviso, ceased to have effect from 1 June 2011. It was also confined to distributions 'out of its current income' — a distribution out of accumulated profits was never covered, even inside the window. Note the unusual reach of the sub-section: it exempted the amount 'either in the hands of the Developer or enterprise or the person receiving such dividend', which is why the shareholder's position is bound up in the same words. Sub-section (7) is narrower than practitioners expect. The 'specified domestic company' is defined in its own Explanation as a domestic company in which a business trust has become the holder of the WHOLE of the nominal value of the equity share capital, excluding only shares mandatorily held by another person under a law or a Government or regulatory direction, or held by a Government or Government body; and the 'specified date' is the date the business trust acquired that holding. The proviso then pulls back the exemption for anything declared, distributed or paid at any time out of accumulated profits and current profits up to the specified date. So a partial holding gets nothing, and the pre-acquisition profit pool gets nothing. Sub-section (8) requires three things together — a company that is a unit of an International Financial Services Centre as defined in s.2(q) of the Special Economic Zones Act, 2005, a unit established in an IFSC on or after 1 April 2016, and income derived solely in convertible foreign exchange as treated by the Reserve Bank under FEMA — and covers only amounts declared on or after 1 April 2017 out of current income or income accumulated as an IFSC unit after 1 April 2017. Sub-section (8) is NOT the abolition provision: the end of the DDT regime was effected by inserting the words 'but on or before the 31st day of March, 2020' into sub-section (1), not by any sunset sub-section.
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Sub-section (6) provides that notwithstanding anything contained in the section, no tax on distributed profits shall be chargeable in respect of the total income of an undertaking or enterprise engaged in developing or developing and operating or developing, operating and maintaining a Special Economic Zone for any assessment year on any amount declared, distributed or paid by such Developer or enterprise by way of dividends (whether interim or otherwise) on or after 1 April 2005 out of its current income either in the hands of the Developer or enterprise or the person receiving such dividend, with a proviso that the provisions of the sub-section shall cease to have effect from 1 June 2011. Sub-section (7) exempts an amount declared, distributed or paid by a specified domestic company to a business trust out of its current income on or after the specified date, with a proviso withholding the exemption for anything paid at any time out of accumulated profits and current profits up to the specified date; its Explanation defines 'specified domestic company' as a domestic company in which a business trust has become the holder of the whole of the nominal value of the equity share capital (excluding equity share capital required to be held mandatorily by any other person under any law or any Government or regulatory direction, or held by any Government or Government body) and 'specified date' as the date of that acquisition. Sub-section (8) exempts an amount declared, distributed or paid on or after 1 April 2017 by a company being a unit of an International Financial Services Centre deriving income solely in convertible foreign exchange, out of its current income or income accumulated as an IFSC unit after 1 April 2017, in the hands of the company or the person receiving the dividend; its Explanation adopts s.2(q) of the Special Economic Zones Act, 2005 for 'International Financial Services Centre', defines 'unit' as one established in an IFSC on or after 1 April 2016, and defines 'convertible foreign exchange' by reference to the Reserve Bank's treatment under FEMA.
The SEZ developer exemption in s.115-O(6) covers only current-income distributions declared on or after 1 April 2005 and, by its own proviso, ceases to have effect from 1 June 2011. The business trust exemption in s.115-O(7) requires the trust to hold the whole of the nominal value of the equity share capital and does not reach profits up to the specified date. The IFSC exemption in s.115-O(8) requires a unit established on or after 1 April 2016, income solely in convertible foreign exchange, and a declaration on or after 1 April 2017.
This is statutory text, not a decision. Each carve-out is drafted with its own opening date, its own source-of-profits restriction and, in the case of sub-section (6), its own sunset in the proviso, so the analysis is date-and-source driven rather than purposive.
Provided that the provisions of this sub-section shall cease to have effect from the 1st day of June, 2011.
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Handle my notice → Ask a CA on WhatsAppSection 115-O(6) exempted from tax on distributed profits any amount declared, distributed or paid on or after 1 April 2005 out of its current income by an undertaking or enterprise engaged in developing, or developing and operating, or developing, operating and maintaining a Special Economic Zone, in the hands of the developer or enterprise or the person receiving the dividend — but its proviso says in terms that the provisions of that sub-section shall cease to have effect from 1 June 2011. Two other carve-outs sit alongside it and are still worth checking for a pre-2020 year: sub-section (7) for a specified domestic company distributing to a business trust out of current income on or after the specified date, and sub-section (8) for a company that is a unit of an International Financial Services Centre deriving income solely in convertible foreign exchange, on amounts declared on or after 1 April 2017 out of current income or income accumulated as such a unit after 1 April 2017. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 115-O(6), section 115-O(7), section 115-O(8), section 115-O, section 2(13A), section 10(23FC) of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.115-O(6), (7) and (8), as printed on the departmental page stamped Year: 2026. The SEZ exemption is the one that generates the assessments, because the sunset is written into the sub-section itself and the two limbs of it are easy to conflate. The exemption ran only to dividend declared, distributed or paid on or after 1 April 2005 and, by force of the proviso, ceased to have effect from 1 June 2011. It was also confined to distributions 'out of its current income' — a distribution out of accumulated profits was never covered, even inside the window. Note the unusual reach of the sub-section: it exempted the amount 'either in the hands of the Developer or enterprise or the person receiving such dividend', which is why the shareholder's position is bound up in the same words. Sub-section (7) is narrower than practitioners expect. The 'specified domestic company' is defined in its own Explanation as a domestic company in which a business trust has become the holder of the WHOLE of the nominal value of the equity share capital, excluding only shares mandatorily held by another person under a law or a Government or regulatory direction, or held by a Government or Government body; and the 'specified date' is the date the business trust acquired that holding. The proviso then pulls back the exemption for anything declared, distributed or paid at any time out of accumulated profits and current profits up to the specified date. So a partial holding gets nothing, and the pre-acquisition profit pool gets nothing. Sub-section (8) requires three things together — a company that is a unit of an International Financial Services Centre as defined in s.2(q) of the Special Economic Zones Act, 2005, a unit established in an IFSC on or after 1 April 2016, and income derived solely in convertible foreign exchange as treated by the Reserve Bank under FEMA — and covers only amounts declared on or after 1 April 2017 out of current income or income accumulated as an IFSC unit after 1 April 2017. Sub-section (8) is NOT the abolition provision: the end of the DDT regime was effected by inserting the words 'but on or before the 31st day of March, 2020' into sub-section (1), not by any sunset sub-section. If it applies to you, the first step is this: Date the declaration, not the financial year. The s.115-O(6) exemption reaches only a dividend declared, distributed or paid on or after 1 April 2005, and the proviso stops the sub-section having effect from 1 June 2011 — a declaration on or after that date is outside it.
Sub-section (6) provides that notwithstanding anything contained in the section, no tax on distributed profits shall be chargeable in respect of the total income of an undertaking or enterprise engaged in developing or developing and operating or developing, operating and maintaining a Special Economic Zone for any assessment year on any amount declared, distributed or paid by such Developer or enterprise by way of dividends (whether interim or otherwise) on or after 1 April 2005 out of its current income either in the hands of the Developer or enterprise or the person receiving such dividend, with a proviso that the provisions of the sub-section shall cease to have effect from 1 June 2011. Sub-section (7) exempts an amount declared, distributed or paid by a specified domestic company to a business trust out of its current income on or after the specified date, with a proviso withholding the exemption for anything paid at any time out of accumulated profits and current profits up to the specified date; its Explanation defines 'specified domestic company' as a domestic company in which a business trust has become the holder of the whole of the nominal value of the equity share capital (excluding equity share capital required to be held mandatorily by any other person under any law or any Government or regulatory direction, or held by any Government or Government body) and 'specified date' as the date of that acquisition. Sub-section (8) exempts an amount declared, distributed or paid on or after 1 April 2017 by a company being a unit of an International Financial Services Centre deriving income solely in convertible foreign exchange, out of its current income or income accumulated as an IFSC unit after 1 April 2017, in the hands of the company or the person receiving the dividend; its Explanation adopts s.2(q) of the Special Economic Zones Act, 2005 for 'International Financial Services Centre', defines 'unit' as one established in an IFSC on or after 1 April 2016, and defines 'convertible foreign exchange' by reference to the Reserve Bank's treatment under FEMA. The matter was decided on 2020-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. The SEZ developer exemption in s.115-O(6) covers only current-income distributions declared on or after 1 April 2005 and, by its own proviso, ceases to have effect from 1 June 2011. The business trust exemption in s.115-O(7) requires the trust to hold the whole of the nominal value of the equity share capital and does not reach profits up to the specified date. The IFSC exemption in s.115-O(8) requires a unit established on or after 1 April 2016, income solely in convertible foreign exchange, and a declaration on or after 1 April 2017.
This is statutory text, not a decision. Each carve-out is drafted with its own opening date, its own source-of-profits restriction and, in the case of sub-section (6), its own sunset in the proviso, so the analysis is date-and-source driven rather than purposive. In the words reproduced by the source cited on this page: "Provided that the provisions of this sub-section shall cease to have effect from the 1st day of June, 2011."
It was decided by the CBDT Circulars & Instructions on 2020-04-01 and is reported as Income-tax Act, 1961, s.115-O(6), (7) and (8), as printed on the departmental page stamped Year: 2026. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 115-O(6), section 115-O(7), section 115-O(8), section 115-O, section 2(13A), section 10(23FC), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The SEZ developer exemption in s.115-O(6) covers only current-income distributions declared on or after 1 April 2005 and, by its own proviso, ceases to have effect from 1 June 2011. The business trust exemption in s.115-O(7) requires the trust to hold the whole of the nominal value of the equity share capital and does not reach profits up to the specified date. The IFSC exemption in s.115-O(8) requires a unit established on or after 1 April 2016, income solely in convertible foreign exchange, and a declaration on or after 1 April 2017. It arises in Capital Gains Exemptions and How Tax Law Is Read matters, on section 115-O(6), section 115-O(7), section 115-O(8), section 115-O, section 2(13A), section 10(23FC) of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Check the source of the distribution. Sub-section (6) covers a distribution 'out of its current income' only; accumulated profits were never within it. For a business trust structure, prove the whole of the nominal value of the equity share capital was held by the trust, subject only to the shares the Explanation permits to be excluded, and identify the specified date — the date of that acquisition. Then segregate the profit pool: the proviso to sub-section (7) denies the exemption for anything paid at any time out of accumulated profits and current profits up to the specified date. For an IFSC claim under sub-section (8), evidence all three limbs — unit established in an IFSC on or after 1 April 2016, income derived solely in convertible foreign exchange, and a declaration on or after 1 April 2017 out of qualifying income. Do not argue that sub-section (8) ended the DDT regime. The end-date is in sub-section (1) itself.
Validity check could not be completed. Validity check could not be completed. Sub-sections (6) to (8) were read on one departmental page only (Year: 2026), and the pages carry no footnote list, so neither the insertion nor any later amendment of these sub-sections could be dated to an Act. The 1 June 2011 sunset in the proviso to sub-section (6) is printed in the statutory text itself and is reliable to that extent. No case law on any of these three sub-sections was searched for this pass. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Sub-sections (6), (7) and (8) were transcribed in full this pass from https://incometaxindia.gov.in/w/section-115-o-21 (Year: 2026, 'Income-tax Act, 1961', heading 'Tax on distributed profits of domestic companies'). Sub-sections (6), (7) and (8) were transcribed a second time from the same page on a separate fetch at verification and came back word-identical, including both Explanations and the proviso to each of sub-sections (6) and (7); they have not been read on a second year's page, so a later pass may still wish to compare the Year 2025 version. On the date in decided_on: this is a statutory-position entry and 2020-04-01 is not a decision date. It is the date from which the s.115-O regime these carve-outs sit inside ceased to reach a distribution — 1 April 2020, the day after the 31 March 2020 end-date printed in sub-section (1). It is not the commencement of any of these three sub-sections, and it is not the sunset of sub-section (6), which its own proviso fixes at 1 June 2011. The departmental pages for section 115-O, 115P, 115Q, 115R, 115S, 115T and 115BBDA print NO numbered footnote list at all, on any year's version I opened, so no commencement date and no amending Act number can be sourced from them. Where a date is given below it is either printed in the statutory text itself or bracketed between two year-stamped departmental versions, and the entry says which. In particular I cannot date the insertion of sub-section (6) or of its proviso to a named Act, and this entry does not name one; the dates 1 April 2005 and 1 June 2011 above are printed in the statutory text itself, not taken from any footnote. The Year 2018 departmental page (/w/section-115-o-19) was checked and confirmed that sub-section (1) did not then contain the words 'but on or before the 31st day of March, 2020', which is what shows that the closing of the regime came later and was done in sub-section (1). This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The SEZ developer exemption in s.115-O(6) covers only current-income distributions declared on or after 1 April 2005 and, by its own proviso, ceases to have effect from 1 June 2011. The business trust exemption in s.115-O(7) requires the trust to hold the whole of the nominal value of the equity share capital and does not reach profits up to the specified date. The IFSC exemption in s.115-O(8) requires a unit established on or after 1 April 2016, income solely in convertible foreign exchange, and a declaration on or after 1 April 2017.
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