Need to rationalise Dividend Distribution Tax: CII

30 Mar '07

3 min read

Once this SPVs distributes dividend, it attracts DDT@ 17% at the first stage and once again at the hands of the holding company when it distributes dividend to the shareholders, thus taxing same stream of dividend income twice.

This is against the principles of taxation according to CII. It is very much pertinent to note that the bid condition to have separate SPVs for each project is mandated by various arms of the Government. Otherwise, the holding companies can avoid this route by having separate units and reduce the incidence of DDT.

CII has therefore, asked for the reintroduction of the erstwhile section 80M of the Income Tax Act used to provide tax credit for DDT, which was withdrawn in 2003.

In addition CII has said that DDT should be definitely eliminated for infrastructure companies and also the general principle of elimination should be applied to other sectors. However, if complete elimination is not possible for all sectors, then for other sectors it should be brought down to 5%, said the CII release.

Confederation of Indian Industry

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