Mr. Rahul, a resident Indian, purchased units in ABC REIT on 1.4.2023. ABC REIT received dividend income from TL Ltd., being a SPV. TL Ltd. opted…

CA Final · Direct Tax Laws and International Taxation · MTP · May 2024
Mr. Rahul, a resident Indian, purchased units in ABC REIT on 1.4.2023. ABC REIT received dividend income from TL Ltd., being a SPV. TL Ltd. opted for section 115BAA. The record date of ABC REIT is 1st June 2023 and it distributed dividend to unitholders in June, 2023. Would dividend stripping provisions of section 94(7) be attracted, if Mr. Rahul sells the units held by him at a loss in January, 2024? Is ABC REIT required to deduct tax at source on the dividend component of income received from SPV and distributed to Mr. Rahul?
(A) Dividend stripping provisions would not be attracted and ABC REIT is not required to deduct tax at source.
(B) Dividend stripping provisions would not be attracted and ABC REIT is required to deduct tax at source@10%
(C) Dividend stripping provisions would be attracted and ABC REIT is required to deduct tax at source@10%
(D) Dividend stripping provisions would be attracted and ABC REIT is not required to deduct tax at source.

Suggested Answer and Working Notes:

Correct Answer: Option (B)

Dividend stripping provisions would not be attracted and ABC REIT is required to deduct tax at source@10%

Topics: Assessment of Trusts and Institutions, Political Parties and Other Special Entities, Assessment of Various Entities

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