Rejecting the industrys plea for allowing dividend set-off across multi-layered and multi-level corporate structures for the purpose of dividend distribution tax, the Finance Minister, Mr P. Chidambaram, has said that he does not see merit in bending the tax laws to encourage such structures. Budget 2008-09 proposes to allow such set-off for one layer only.
Nobody has told me why should there be multi-layered companies. If you search your heart, you know you are not really speaking for multi-layered operation companies, your plea is on behalf of multi-layered shell companies that are simply created and operated from one desk and by one man just as a tax shelter, Mr Chidambaram said at a post-Budget gathering of industrialists here.
He made it clear that it was not the Governments intention to encourage inter-locking holdings and multi-layered multi-level companies where it is all controlled at one point, but for the purpose of tax shelters such structures are created.
Mr Chidambaram said that the dividend set-off has been proposed for one layer in response to a felt need that many projects are undertaken by special purpose vehicles (SPVs).