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Deemed dividend

@*CS Siddharth Bumb. * (B.Com, CA Final, CS ) (5270 Points)

30 March 2010

What is Deemed Dividend and Deemed Income????

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Kaushik Vankadkar (Service) (350 Points)
Replied 30 March 2010

22) ⁹⁰ dividend ⁹¹ includes

(a) any distribution ⁹¹ by a company of accumulated profits ⁹¹, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company ;

(b) any distribution ⁹¹ to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits ⁹¹, whether capitalised or not ;

(c) any distribution ⁹¹ made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not ;

(d) any distribution ⁹¹ to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits ⁹¹ which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not ;

(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) ⁹²[made after the 31st day of May, 1987, by way of advance or loan to a shareholder ⁹³ , being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits ⁹⁴ ;

but dividend does not include

(i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ;

⁹⁵ [(ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, ⁹⁶[and before the 1st day of April, 1965] ;]

(ii) any advance or loan made to a shareholder ⁹⁷ [or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ;

(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off;

⁹⁸[(iv) any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A ⁹⁹ of the Companies Act, 1956 (1 of 1956);

(v) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company).]

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