Page 181 - SAIT Compendium 2016 Volume2

IN 2 (3) Income Tax acT: InTeRPReTaTIon noTes IN 2 (3)
deemed by this paragraph to be available for distribution to the shareholders, whether such pro t is of a capital
nature or is not of a capital nature;
(iiB)subject to the provisions of paragraphs (iiA) and (iv) of this proviso, 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 shares issued by the company are cancelled without a return of the share capital or any share premium relating to such shares, such share capital or share premium or any reserve created by reason of the cancellation of such shares shall, to the extent that the said pro t may be apportioned to the said shares, be deemed to consist of a pro t (of the same nature as the aforesaid pro t) available for distribution to shareholders who are or may become interested in such share capital, share premium or reserve, and where any cash is or any assets are given to shareholders by way of a return of or a distribution out of such share capital, share premium or reserve, the sum of the amount of such cash and the value of such assets shall, to the extent that such sum does not exceed the amount deemed by this paragraph to consist of a pro t available for distribution to shareholders, be deemed to be a pro t (of the same nature as the rst-mentioned pro t) distributed to the shareholders;
(iii) if, in the event of any partial reduction of the capital of a company or acquisition, cancellation or redemption of shares issued by that company, any cash or any asset is given to a shareholder and the cash or asset (or a portion thereof) represents a return of share capital or share premium, the amount of share capital or share premium so returned—
(aa) to shareholders entitled to participate in distributions of pro ts which are not of a capital nature and in respect of whom any amount is deemed under paragraph (i)(bb) of this proviso to be such a pro t available for distribution to such shareholders, shall (to the extent that the amount returned to such shareholders does not exceed the aggregate of the amounts of the pro ts so deemed to be available for distribution to such shareholders) be deemed to be a pro t, not of a capital nature, distributed to such shareholders, and the amounts so deemed to be available for distribution shall be deemed to have been reduced accordingly; or
(bb) to shareholders entitled to participate in distributions of pro ts of a capital nature and in respect of whom any amount is deemed under paragraph (i)(aa) of this proviso to be such a pro t available for distribution to such shareholders, shall (to the extent that the amount returned to such shareholders (less so much thereof as is deemed under subparagraph (aa) of this paragraph to be a pro t, not of a capital nature, distributed to such shareholders) does not exceed the aggregate of the amounts of the pro ts deemed under the said paragraph (i)(aa) to be available for distribution to such shareholders) be deemed to be a pro t of a capital nature distributed to such shareholders and the amounts so available for distribution shall be deemed to have been reduced accordingly;
(iiiA)in the event of the reduction of the share capital or share premium of a company, or the acquisition, cancellation or redemption of shares issued by that company, in relation to a class of shareholders, that company must be deemed to have distributed pro ts to the shareholders in that class to the extent that the share capital and share premium so reduced exceeds the share capital and share premium contributed by that class of shareholders;
(iv) where the company has lost some of its paid-up share capital (including any share premium) as a result of losses actually incurred by it and such share capital is in consequence partially reduced to take account of such losses, any amounts which in terms of this proviso are at the date of such partial reduction of such share capital deemed to be pro ts available for distribution to shareholders shall be deemed to have been reduced to the extent that such losses are so accounted for and in such manner that, as far as possible and on the basis, where necessary, of an apportionment between different classes of share capital in accordance with the rights of shareholders—
(aa) any such pro ts which are of a capital nature and relate to shareholders entitled to participate in pro ts of that nature, are reduced by so much of the amount by which the said share capital is reduced as is attributable to losses of a capital nature; and
(bb) any such pro ts which are not of a capital nature and relate to shareholders entitled to participate in pro ts which are not of a capital nature, are reduced by so much of the amount by which the said share capital is reduced as is attributable to losses which are not of a capital nature;
(v) in the event of the winding-up or liquidation of the company—
(aa) any pro ts which in terms of the preceding provisions of this proviso are, at the commencement of the
winding-up or liquidation, deemed to be available for distribution to shareholders shall, if the company has lost some of its paid-up share capital (including any share premium) as a result of losses actually incurred by it, be deemed to have been reduced in such manner that, as far as possible and on the basis, where necessary, of an apportionment between different classes of share capital in accordance with the rights of shareholders—
(A) any such pro ts which are of a capital nature and relate to shareholders entitled to participate in pro ts of that nature, are reduced by so much of the loss of the said share capital as is attributable to losses of a capital nature; and
(B) any such pro ts which are not of a capital nature and relate to shareholders entitled to participate in pro ts which are not of a capital nature, are reduced by so much of the loss of the said share capital as is attributable to losses which are not of a capital nature; and
(bb) the aggregate of any cash and the value of any assets given to shareholders entitled to participate in pro ts not of a capital nature shall, to the extent that such aggregate exceeds so much of the sum of the share
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