Section 236 of Income Tax Act "Relief to company in respect of dividend paid out of past taxed profits"
236. (1) Where in respect of any previous year relevant to the assessment year commencing after the 31st day of March, 1960, an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends within India, pays any dividend wholly or partly out of its profits and gains actually charged to income-tax for any assessment year ending before the 1st day of April, 1960, and deducts tax therefrom in accordance with the provisions of Chapter XVII-B, credit shall be given to the company against the income-tax, if any, payable by it on the profits and gains of the previous year during which the dividend is paid, of a sum calculated in accordance with the provisions of sub-section (2), and, where the amount of credit so calculated exceeds the income-tax payable by the company as aforesaid, the excess shall be refunded.
(2) The amount of income-tax to be given as credit under
sub-section (1) shall be a sum equal to ten per cent of so
much of the dividends referred to in sub-section (1) as are
paid out of the profits and gains actually charged to
income-tax for any assessment year ending before the 1st day
of April, 1960.
Explanation 1.-For the purposes of this section, the
aggregate of the dividends declared by a company in respect
of any previous year shall be deemed first to have come out
of the distributable income of that previous year and the
balance, if any, out of the undistributed part of the
distributable income of one or more previous years
immediately preceding that previous year as would be just
sufficient to cover the amount of such balance and as has
not likewise been taken into account for covering such
balance of any other previous year.
Explanation 2.-The expression "distributable income of any
previous year" shall mean the total income (as computed
before making any deduction under Chapter VI-A) assessed for
that year as reduced by-
(i) the amount of tax payable by the company in respect of
its total income;
(ii) the amount of any other tax levied under any law for
the time being in force on the company by the Government or
by a local authority in excess of the amount, if any, which
has been allowed in computing the total income;
(iii) any sum with reference to which a deduction is
allowable to the company under the provisions of section
80G; and
(iv) in the case of a banking company, the amount actually
transferred to a reserve fund under section 17 of the
Banking Companies Act, 1949 (10 of 1949),
and as increased by-
(a) any profits and gains or receipts of the company, not
included in its total income (as computed before making any
deduction under Chapter VI-A); and
(b) any amount attributable to any allowance made in
computing the profits and gains of the company for purposes
of assessment, which the company has not taken into account
in its profit and loss account.
236A. (1) Where seventy-five per cent of the share
capital of any company is throughout the previous year
beneficially held by an institution or fund established in
India for a charitable purpose the income from dividend
whereof is exempt under section 11, credit shall be given to
the institution or fund against the tax, if any, payable by
it, of a sum calculated in accordance with the provisions of
sub-section (2), in respect of its income from dividends
(other than dividends on preference shares) declared or
distributed during the previous year relevant to any
assessment year beginning on or after the 1st day of April,
1966 by such a company, and where the amount of credit so
calculated exceeds the tax, if any, payable by the said
institution or fund, the excess shall be refunded.
(2) The amount to be given as credit under sub-section (1)
shall be a sum which bears to the amount of the tax payable
by the company under the provisions of the annual Finance
Act with reference to the relevant amount of distributions
of dividends by it the same proportion as the amount of the
dividends (other than dividends on preference shares)
received by the institution or fund from the company bears
to the total amount of dividends (other than dividends on
preference shares) declared or distributed by the company
during the previous year.
Explanation.-In sub-section (2) of this section and in
section 280ZB, the expression "the relevant amount of
distributions of dividends" has the meaning assigned to it
in the Finance Act of the relevant year.