Section 236 - Relief to company in respect of dividend paid out of past taxed profits

Companies get 10% tax credit on dividends from profits taxed before April 1, 1960, with refunds if excess applies

A company paying dividends from profits previously taxed before April 1, 1960, and deducting tax accordingly, is entitled to a credit against income tax payable on profits of the year the dividend is paid. This credit equals ten percent of the dividend paid from such past taxed profits. If the credit exceeds the tax payable, the excess must be refunded. Dividends are deemed first paid from the distributable income of the relevant year, then from undistributed distributable income of preceding years. Distributable income is defined as total income assessed before certain deductions, reduced by taxes payable and other specified amounts, and adjusted for certain profits and allowances not included in total income. This provision applies to Indian companies and those with prescribed arrangements for dividend declaration and payment within India.