Amendment of section 115-O.
55. In section 115-O of the Income-tax Act,-
(a) after sub-section (6), the following sub-section shall be inserted, with effect from the 1st day of June, 2016, namely:-
‘(7) No tax on distributed profits shall be chargeable under this section in respect of any amount declared, distributed or paid by the specified domestic company by way of dividends (whether interim or otherwise) to a business trust out of its current income on or after the specified date:
Provided that nothing contained in this sub-section shall apply in respect of any amount declared, distributed or paid, at any time, by the specified domestic company by way of dividends (whether interim or otherwise) out of its accumulated profits and current profits up to the specified date.
Explanation.-For the purposes of this sub-section,-
(a) “specified domestic company” means a domestic company in which a business trust has become the holder of whole of the nominal value of equity share capital of the company (excluding the equity share capital required to be held mandatorily by any other person in accordance with any law for the time being in force or any directions of Government or any regulatory authority, or equity share capital held by any Government or Government body);
(b) “specified date” means the date of acquisition by the business trust of such holding as is referred to in clause (a).’;
(b) after sub-section (7) as so inserted, the following sub-section shall be inserted with effect from the 1st day of April, 2017, namely:-
‘(8) Notwithstanding anything contained in this section, no tax on distributed profits shall be chargeable in respect of the total income of a company, being a unit of an International Financial Services Centre, deriving income solely in convertible foreign exchange, for any assessment year on any amount declared, distributed or paid by such company, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2017, out of its current income, either in the hands of the company or the person receiving such dividend.
Explanation.-For the purposes of this sub-section,-
(a) “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).;
(b) “unit” means a unit established in an International Financial Services Centre, on or after the 1st day of April, 2016;
(c) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999) and the rules made thereunder.’.
Notes on Clauses:
Clause 55 of the Bill seeks to amend section 115-O of the Income-tax Act relating to tax on distributed profits of domestic companies.
Sub-clause (a) of the said clause seeks to insert a new subsection to provide that no tax on distributed profits shall be chargeable under this section in respect of any amount declared, distributed or paid by the specified domestic company by way of dividends (whether interim or otherwise) to a business trust out of its current income on or after the specified date. It is further proposed to provide that nothing contained in the proposed subsection shall apply in respect of any amount declared, distributed or paid, at any time, by the specified domestic company by way of dividends (whether interim or otherwise) out of its accumulated profits and current profits up to the specified date. It is also proposed to define the expression “specified domestic company” and “specified date” for the purposes of the proposed sub-section.
These amendments will take effect from 1st June, 2016.
Sub-clause (b) of the said clause seeks to insert a new subsection (8) in the said section so as to provide that no tax on distributed profits shall be chargeable in respect of the total income of a company being a unit of an International Financial Services Centre, deriving income solely in convertible foreign exchange, for any assessment year on any amount declared, distributed or paid by such company, by way of dividends (whether interim or otherwise) on or after the 1st April, 2017 out of its current income, either in the hands of the company or the person receiving such dividend and also to define certain expressions used therein.
This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent years.
