Sun Limited, an Indian company owned two subsidiary companies including Moon Limited (Singapore), a 100% subsidiary and Mars Private Limited (U.K.), a subsidiary with 75% shareholding held by Sun Limited and 25% shares h

Answer 6(c) Computation of Allowed deduction eligible under section 80M of the Income Tax Act, 1961 (the Act) Particulars Amount (₹) Final Dividend from Moon Limited (Singapore) 5,00,000 Interim Dividend from Mars Private Limited (U.K.) 2,50,000 Dividend from Venus Join Venture LLP Nil Total Dividend Income eligible 7,50,000 Less: Interest Expenses allowed (20% of 7,50,000) Note: As per proviso to section 57 of the Act, Interest expenses incurred can be claimed against dividend income, but shall not exceed 20% of the dividend income. Hence Amount of interest deduction allowed would be lower of 20% of (5,00,000+2,50,000) or 3,00,000 = i.e. 1,50,000 1,50,000 Net dividend Income (A) 6,00,000 Note: The deduction under Section 80M should be calculated on the net dividend, i.e., after deducting expenses directly attributable to earning the dividend income, such as interest on borrowed funds. Dividend distributed by the company to shareholders (B) 4,50,000 Deduction eligible under section 80M 4,50,000 (A) Net Dividend Income or (B) Dividend distributed by the Company whichever is less