INTRODUCTION
| 10(34) : Exempted of Dividend | 115O : DDT | 194 : TDS |
2(22)(a) to (d) | Applicable | Applicable | Not Applicable |
2(22)(e) | Not Applicable | Not Applicable | Applicable |
1. General Meaning of Dividend : It is the sum received by the Shareholders of a Company on the distribution of its profits. However Sec. 2(22) define dividend which are notionally or by friction of law is treated as dividend.
2. Dividend Is not impressed with character of Profit : ‘Dividend’ in its ordinary connotation means the sum paid to or received by a shareholder proportionate to his shareholding in a company out of the total sum distributed. Dividend distributed by a Company being a share of its profits declared as distributable among the shareholders, is not impressed with the character of the profits from which it reaches the hands of the shareholders.
3. A Dividend u/s 205 of the Companies Act can be paid only out of the profits of a company whether for that year or out of the profits of the company for any previous financial years as set out in that section, and in the manner set out in that section.
4. While reading Sec.2(22) stress on these sentences particularly the italicized words :
(a) To the extent to which distribution is attributable to the accumulated profits.
(b) To the extent to which the company Possesses accumulated profits.
(c) Distribution which entail the release of company’s assets.
5. As per sec. 2(22) following payments or distribution are not treated as dividend..
(a) any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of Sec. 77A of the Companies Act, 1956.
(b) 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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