Page 180 - SAIT Compendium 2016 Volume2

IN 2 (3) Income Tax acT: InTeRPReTaTIon noTes IN 2 (3)
Annexure B — The de nition of a ‘dividend’ before the coming into operation of Part VIII of Chapter II of the Act
‘dividend’ means any amount distributed by a company (not being an institution to which section 10 (1) (d) applies) to its shareholders, and in this de nition the expression ‘amount distributed’ includes—
(a) in relation to a company that is being wound up, liquidated or deregistered or the corporate existence of which
is nally terminated, any pro ts distributed in the course of the winding up, liquidation, deregistration or nal termination of that company: Provided that any pro ts distributed by the liquidator of the company are deemed for purposes of this de nition to have been distributed by the company;
(b) in relation to a company that is not being wound up, liquidated, or deregistered or where the corporate existence of that company is not nally terminated, any pro ts distributed, including an amount equal to the nominal value, at the time of issue thereof, of any capitalisation shares awarded to shareholders and the nominal value of any bonus debentures or securities awarded to shareholders;
(c) any reduction of the pro ts of a company as a result of— (i) the reduction of the capital of that company; or
(ii) the acquisition, cancellation or redemption of shares issued by that company; and
(cA). . .
(cB) any reduction of the pro ts of a company, if—
(i) that company holds shares in any other company which is a shareholder in relation to that company; and
(ii) those shares are cancelled, (d) . . .
but does not include—
(e) the nominal value of any capitalization shares awarded to a shareholder to the extent to which such shares have been
paid up by means of the application of the whole or any portion of the share premium account of a company;
(f) subject to the provisions of the rst proviso to this de nition, any distribution to the extent that it represents a
reduction of the share capital or share premium account of a company;
(g) any amount distributed by a company to a shareholder where the company and the shareholder form part of the same
group of companies as de ned in section 41, to the extent that the shareholder reduces the cost of the shares held in
the company in accordance with generally accepted accounting practice as a result of the distribution;
(h) the nominal value of any capitalization shares awarded to shareholders as part of the equity share capital of a
company;
(i) any amount distributed by a co-operative by way of a bonus, to the extent that such amount is allowable as a
deduction from the income of such co-operative under the provisions of section 27;
(j) any amount distributed by way of the redemption of a participatory interest in a portfolio, arrangement or scheme
contemplated in paragraph (e) of the de nition of ‘company’:
Provided that, for the purposes of this de nition—
(i) where a company has on or after 1 January 1974 transferred any amount from reserves (excluding any share
premium account) or undistributed pro ts to the share capital or the share premium account of the company without applying the amount in paying up capitalization shares or has applied the amount in paying up capitalization shares the nominal value of which did not in whole or in part constitute an amount distributed as contemplated in the foregoing provisions of this de nition, the amount so transferred (reduced by so much thereof as constitutes such an amount distributed) shall be deemed—
(aa) to the extent that such amount (as so reduced) is shown to consist of pro ts of a capital nature, to be a pro t of a capital nature available for distribution by the company to shareholders who, in the event of a distribution by the company at any time (whether before or during the winding-up or liquidation of the company) of pro ts of a capital nature would be entitled to participate in such a distribution; and
(bb) to the extent that subparagraph (aa) does not apply, to be a pro t which is not of a capital nature and is available for distribution by the company to shareholders who, in the event of a distribution by the company at any time (whether before or during the winding-up or liquidation of the company) of pro ts which are not of a capital nature would be entitled to participate in such a distribution,
regardless of whether in either case the company in fact has or has not any pro ts available for distribution;
(ii) where the share capital of the company consists of different classes of share capital, any amount deemed by paragraph (i) of this proviso to be available for distribution to shareholders shall, in applying that paragraph, be apportioned between such classes of share capital in accordance with the rights of the holders of the corresponding classes of shares to participate in distributions of pro ts of a capital nature or pro ts which are not of a capital nature, as the case may be, and the amount deemed by the said paragraph to be available for distribution to the shareholders in respect of any such class of shares shall be the amount allocated to the share capital of that class
under such apportionment;
(iiA)where any amount is under the provisions of paragraph (i) of this proviso or that paragraph as applied by paragraph
(ii) of this proviso, deemed to be a pro t available for distribution to shareholders and any of the shares of any class (hereinafter referred to as the original shares) held by any such shareholders are converted into shares of any other class or the original shares are cancelled and shares of any other class are issued in place of the original shares, the said amount shall, to the extent that it relates to or may have been apportioned to the original shares, be deemed to relate to and to be a pro t available for distribution to the shareholders in respect of the shares of such other class and the provisions of this proviso shall, to the extent that the said amount is deemed to consist of a pro t as aforesaid, apply in respect of such amount as though it were an amount referred to in paragraph (i) of this proviso, and the shareholders in respect of the shares of such other class shall, regardless of the rights attaching to such shares, be deemed as respects the said amount to be entitled to participate in pro ts of the same nature as the pro t
172
saIT comPendIum oF Tax LegIsLaTIon VoLume 2