Section 115BBDA

Section 115BBDA — the law in short

What the courts have decided on section 115BBDA, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Avendus Enhanced Return Fund v ACIT — a Category III AIF is assessed in its own name, and a s.14A disallowance the fund overstated in its own return goes back to the Assessing Officer for verification ITATHelps taxpayerValidity unconfirmed
  My client is a Category III Alternative Investment Fund. It filed its own return, overstated a section 14A disallowance by more than a crore, and the Assessing Officer and the Commissioner (Appeals) both refused to correct it, citing Goetze. Is a revised computation before the Assessing Officer really worthless?
  No. The Mumbai Tribunal set aside the appellate order and restored the issue to the Assessing Officer, holding that Goetze (India) is confined to the powers of the Assessing Officer while the Bombay High Court in Pruthvi Brokers & Shareholders has held that the appellate authorities are competent to entertain a legitimate claim even if it was not made through a revised return. It did not decide the merits: because the nature and quantum of the exempt income, the applicability of section 115BBDA and the consequential section 14A disallowance all required verification from the assessment records, the matter went back with all contentions open. Note what the case also shows on the facts — a Category III AIF is assessed in its own name, on its own income, under the ordinary provisions; the section 115UB pass-through has nothing to do with it.
• Statutory position — the first proviso to s.234C(1): no interest for a shortfall caused by capital gains, casual income, first-year business income or dividend income CBDT Circulars & InstructionsCuts both ways
  My client sold a property in February and paid the whole tax on it with the March instalment. The intimation still charges s.234C interest on the June, September and December instalments. Is there a defence in the section itself?
  Yes, and it is in the section itself rather than in any circular. The first proviso to s.234C(1) disapplies the sub-section to any shortfall in the payment of tax due on the returned income where the shortfall is on account of under-estimate or failure to estimate (a) the amount of capital gains, (b) income of the nature referred to in s.2(24)(ix) — casual income such as winnings from lotteries, crossword puzzles and races, (c) income under the head 'Profits and gains of business or profession' in cases where the income accrues or arises under that head for the first time, or (d) the amount of dividend income. The relief is conditional: the assessee must have paid the whole of the tax payable in respect of that income, computed as if it were part of the total income, as part of the remaining instalments of advance tax which are due, or where no such instalments are due, by 31 March of the financial year.
• Statutory position — s.115BBDA: the ten per cent charge on a resident shareholder receiving dividend above ten lakh rupees, and why it sat on top of DDT rather than instead of it CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  My client got a notice charging ten per cent on his dividend income under s.115BBDA even though the companies had already paid DDT. Is that double taxation, and for which years does it apply?
  Section 115BBDA charges a specified assessee resident in India, whose total income includes dividend in aggregate exceeding ten lakh rupees declared, distributed or paid by a domestic company or companies on or before 31 March 2020, to income-tax at ten per cent on the amount of such dividend in aggregate exceeding ten lakh rupees, plus the tax on the rest of his income computed as if the dividend were excluded. Sub-section (2) bars any deduction for expenditure or allowance and any set off of loss in computing that dividend income, and the Explanation excludes a s.2(22)(e) deemed dividend and takes a domestic company, a s.10(23C)(iv)/(v)/(vi)/(via) fund, institution, trust, university or hospital, and a trust or institution registered under s.12A, s.12AA or s.12AB out of 'specified assessee'.
• Statutory position — how DDT was abolished: the end-date written into s.115-O(1), s.115R(2) and s.115BBDA(1), and the withholding that replaced it under s.194 and s.194K CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  Everyone says DDT was abolished in 2020. Which provision actually did it, from what date, and what withholding took its place on dividend and on mutual fund income?
  No section was repealed. The abolition was done by writing an end-date into the charging words themselves: s.115-O(1) now charges only dividend declared, distributed or paid 'on or after the 1st day of April, 2003 but on or before the 31st day of March, 2020'; s.115R(2) charges only income distributed by a specified company or Mutual Fund 'on or before the 31st day of March, 2020'; and s.115BBDA(1) reaches only dividend 'declared, distributed or paid by a domestic company or companies on or before the 31st day of March, 2020'. Dividend then fell to be taxed in the shareholder's hands, with withholding revived under s.194 for dividend paid by a company and s.194K for income in respect of mutual fund units, both at ten per cent.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.