Declaration of dividend

This query is : Resolved

pradeepta (Querist)
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29 December 2011 Dear Sirs, pls guide me with regard to the following.

A state owned undertaking having carried forward Accumulated losses worth Rs. 18.68 lakhs and current year profit amounting of Rs.2.34 lakhs.The profit for the current year comprises of writting back of provision related to the previous year,Interest on fixed deposit and rent on immovable property. So whether the undertaking can declare divend out of the current year profit.

CS GURVINDER SINGH

CS GURVINDER SINGH (Expert)
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29 December 2011 Previous year losses are required to be set off first, before declaring any dividend.

Profit from writing back of provisions are not allowed to be distributed as dividend as these profits are no realisble in cash.

CS Ankur Srivastava

CS Ankur Srivastava (Expert)
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02 January 2012 If the company has incurred any loss in any previous year then the amount of the loss or or the amount which is equal to the amount provided for depreciation for that year whichever is less, shall be set off against the profits of the company for the year for which dividend is proposed to be declared or paid or against the profits of the company for any previous financial year or years, arrived at in both cases after providing for depreciation.

Therefore you have to set off the amount of loss or the amount of deprecitaion of loss making years, whichever is less have to set off before declaring the dividend.

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