TaxTMI 
TaxTMI 
Cooperative banks have to pay regular income tax.After such payment they distribute dividend.Such dividend should be tax free in the hands of shareholder.Under the basic provision of double taxation such dividends must be tax free.
Taxability of dividends received
11 Oct 2008 
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Taxability of cooperative bank dividends: shareholders taxed; banks may claim deduction as business expenditure, subject to dispute.
Dividends received by cooperative bank members are income in the hands of shareholders and not covered by the discussed dividend exemption. A cooperative bank may claim dividends paid to members as business expenditure under general deduction principles because such payments can satisfy allowability tests and are not expressly disallowed by the referenced disallowance provisions, but the claim is fact-sensitive and may provoke disputes with tax authorities. (AI Summary)
Dividends received by cooperative bank members are income in the hands of shareholders and not covered by the discussed dividend exemption. A cooperative bank may claim dividends paid to members as business expenditure under general deduction principles because such payments can satisfy allowability tests and are not expressly disallowed by the referenced disallowance provisions, but the claim is fact-sensitive and may provoke disputes with tax authorities. (AI Summary)