DOMESTIC COMPANY ...has made prescribed arrangements to declare dividend

[DEV KUMAR KOTHARI]

In section 2.22A of IT Act, and also in various Finance Act / Bill for example recent Finance Bill 2020 also we find meaning / definition of domestic company in clause 2 (13) as

(13) For the purposes of this section and the First Schedule,-

(a) “domestic company” means an Indian company or any other company which, in respect of its income liable to income-tax under the Income-tax Act, for the assessment year commencing on the 1st day of April, 2018, has made the prescribed arrangements for the declaration and payment within India of the dividends (including dividends on preference shares) payable out of such income;

Rates of income-tax

I. In the case of a domestic company,- (i) where its total turnover or the gross receipt in the previous year 2017-2018 does not exceed four hundred crore rupees; 25 % of the total income

(ii) other than that referred to in item (i) 30 % of the total income my curiosity (since childhood) is about significance of underlined words namely ' .... has made the prescribed arrangements for the declaration and payment within India of the dividends (....

Is it simply an old practice continuing (may be wrong) or we can say that if a company has not made arrangements to declare / pay dividend than it is not a domestic company?

hence not liable to tax, as such.

[DR.MARIAPPAN GOVINDARAJAN]

Thank you for your information sir. But I was in a doubt whether you have raised a query. You are the resource to all of us.

[DEV KUMAR KOTHARI]

Dear DR.MARIAPPAN GOVINDARAJAN,

Thank you for your compliments.

This was query raised by me. As per my reading, my point is correct that a claim can be made that no tax is payable if a company has not made arrangement to declare dividend because such company is not a domestic company on which tax is levied and rate is prescribed. However, this may attract amendment.

In earlier days of training and profession I discussed this matter with seniors, but did not get a satisfactory reply/ opinion. At that time amendment with retrospective effect was very common, therefore, clients also did not take aggressive mode to make claim.

Your views will be helpful for brain storming.

I think, in pending appeals this claim can be made, as additional claim without withholding tax payment. During assessments also claim can be made similarly.

In e-ROI there is no scope for making additional claims, so a claim can be preferred before or after filing of ROI by way of letter to the AO stating that tax has been paid without prejudice and under protest., and in e-proceeding also claim can be made for consideration of the AO.

Other learned readers are also requested to send their views.

Regards

Dev Kumar Kothari

AI Summary

Domestic company definition: prescribed dividend-arrangement requirement may determine tax liability and procedural claim options. Whether a company qualifies as a domestic company depends on the statutory requirement that it has made the prescribed arrangements for the declaration and payment within India of dividends; absence of those arrangements is queried as a basis to contend the entity is not a domestic company and thus not subject to the domestic company tax rate. Procedural options suggested include raising the claim in assessments or appeals, submitting letters to the assessing officer where e-filing is restrictive, and treating paid tax as under protest to preserve the claim.