ITAT Mumbai: Transfer to Central Government Not ‘Dividend’; DDT Under Section 115-O Not Applicable
Court / Authority
Income Tax Tribunal
Update / Judgement Date
29 Aug 2026
Source
WCP News Bulletin
Author
Manas Yadav — WCP Legal Desk
Reading Time
2 min read
View Count
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench “E”, has dismissed multiple appeals filed by the Revenue against Export-Import Bank of India, holding that statutory transfers made to the Central Government do not constitute “dividend” and are therefore not liable to Dividend Distribution Tax (DDT) under Section 115-O of the Income-tax Act, 1961.
The dispute arose from the Revenue’s contention that amounts transferred by the assessee to the Central Government should be treated as dividend under Section 2(22), thereby attracting DDT liability. The Assessing Officer had rejected the assessee’s refund claim under Section 237 and levied tax along with interest on such transfers.
However, the Commissioner (Appeals) allowed the assessee’s claim, holding that the transfer was a statutory obligation under Section 23(2) of the Export-Import Bank of India Act, 1981, and not a voluntary distribution of profits. This finding was based on earlier Tribunal rulings in the assessee’s own case as well as precedents such as LIC v. JCIT.
Affirming this position, the Tribunal emphasized that the concept of “dividend” presupposes the existence of share capital and shareholders receiving proportionate distributions. In the present case, the assessee is a statutory corporation whose capital is not divided into shares, and the Central Government cannot be treated as a shareholder in the conventional sense.
The Tribunal held that mandatory transfers under statute lack the essential characteristics of dividend distribution and therefore fall outside the scope of Section 2(22). Consequently, the precondition for invoking Section 115-O was not satisfied.
In the absence of any change in facts or law, and following consistent precedents in the assessee’s own case, the Tribunal upheld the deletion of DDT and dismissed all Revenue appeals across multiple assessment years.
Full Judgement / Attachment
Full Judgement
Frequently asked questions about Income Tax Tribunal
- What is the Income Tax Appellate Tribunal (ITAT)?
- The ITAT, set up in 1941, is the second appellate authority in direct tax matters and the final fact-finding body. It hears appeals against orders of the Commissioner (Appeals) and certain other authorities, through benches across India.
- What is the time limit to file an appeal before the ITAT?
- An appeal must be filed within two months from the end of the month in which the order is communicated. This rule has applied since 1 October 2024 and continues under the Income-tax Act, 2025. The Tribunal can condone delay for sufficient cause.
- Can the ITAT stay a tax demand?
- Yes. The Tribunal can stay recovery of a disputed demand while an appeal is pending, usually on deposit of a part of the demand or furnishing security. Stays are granted for a limited period, and the appeal is expected to be decided within it.
- Where does an appeal go after the ITAT?
- An appeal against an ITAT order lies to the High Court, but only on a substantial question of law. A further appeal lies to the Supreme Court.
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- Post your requirement on White Collar Professional to receive proposals from verified Chartered Accountants and tax Advocates, compare them, and pay securely through the platform. This page also tracks the latest ITAT ITAT orders as they are reported.
