16 November 2007
Share premium is covered by the word to the extent accumulated profits.i.e. if to treat the amount of loan & advanses as deemed dividend amount of share premium also included.For ur reference as per The Companies Act,1956 dividend can not be declared from the accumulated profits.And as per the Income Tax Act it should be commercial & real profit what does commercial & real profit mean.
19 November 2007
Share premium is Capital Profits it can not be used for the distribution of Dividends. On Equity Shares, dividend cann not be distributed when the company does't have any profit in the current year so no queastion of dividend arise. But when the cumulative preference shres are there, fixed rate of dividend should be provided even if the company doesn't have any profits, the amount of fixed dividend is considered as liability of the company and is provided in that subsequent year in which the company have profits.But the company can not use sharepremium money. Commercial and real profit means profit & loss profits minus General Reserve, Dividend to cumulative preference shares, Provision for corporate dividend tax, then if amount is left then company can declared profits out of commercial and real profit.
19 November 2007
commercial & real profit means not only the profit & loss profit but after taking all the contingent losses are taken to be considered and all normal savings should be done then of any residual profits are there only then those are commercial and real profits.
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