Any Distribution Entailing Release :Tax Management with reference to -Deemed Dividend-
2.2. [ SEC. 2(22)(a) ] : ANY DISTRIBUTION ENTAILING RELEASE ETC.
(1).Any distribution (2). by a company (3). of accumulated profits, whether capitalized or not (4). if such contribution entails the release by the company to its shareholders of all or any part of the assets of the company.
1. Computation of accumulated profits : Accumulated Profits means commercial profit upto the date of distribution and it comprises of :
Current Profit including Capital Gain
General Reserve , Investment allowance reserve etc.
Tax Free incomes including agricultural income.
But does not include…
Provisions of taxation and dividend
2. What is Capitalized Accumulated Profits : Where the Accumulated Profit is capitalized by issue of Bonus Shares.
3. What do you mean by release of Company’s Assets. Where the distribution is made in cash or in kind to the shareholders – it means there is a release of company’s assets.
4. When the Assets are distributed u/s 2(22)(a), the market value of the assets on the date of distribution is taken for computing dividend. No Capital gain arises since it is a Gift.
All efforts are made to keep the content of this site correct and up-to-date. But, this site does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.
The visitors may click here to visit the web site of Income Tax Department for resolving their doubts or for clarifications