The purpose of Section 80M is to provide relief from double taxation of dividends, which can occur when profits are taxed both at the company level (dividend-paying company) and at the shareholder level (dividend-receiving company).
Under the provisions of Section 80M, when a domestic company receives dividends from another domestic company in which it holds shares, it is eligible for a deduction on such dividends before calculating its taxable income. This deduction helps to avoid the cascading effect of taxation, where the same profits are taxed twice—once at the company level and again when distributed as dividends.
The key objective of Section 80M is to incentivize the distribution of dividends among domestic companies and reduce the tax burden on such distributed profits. This provision encourages companies to share profits with other domestic companies, which in turn may lead to increased investments, collaboration, and growth within the corporate sector.
