Income Tax Act, 1967.

Dividends.

387.—(1) (a) For the purposes of this section, section 458 shall apply to the company so that the statement required by that section shall, in relation to every warrant, cheque or order drawn or made by the company for the payment of any dividend payable wholly or in part out of the profits, show, in addition to any particulars required to be given apart from this section, either (as the case may require)—

(i) that the whole of the sum for which the warrant, cheque or order is drawn or made is a payment of a dividend of the profits, or

(ii) that a part (the gross amount of which, before any deduction in respect of income tax, is separately stated) of such sum is a payment out of the profits,

and such whole or such part is hereafter in this section referred to as the relevant payment.

(b) The said statement shall also show the period (hereafter in this section referred to as the dividend period) out of the profit of which the relevant payment is made and—

(i) where, as respects the relevant payment, the company is, in accordance with subsection (2) (a), not entitled to deduct income tax, that fact shall be separately indicated in the said statement,

(ii) where, as respects part of the relevant payment, the company is, in accordance with subsection (2) (b), not entitled to deduct income tax, that part shall be separately indicated in the said statement,

(iii) where, as respects the relevant payment, the amount of the income tax which the company would otherwise be entitled to deduct is, in accordance with subsection (2) (b), reduced by one-half of such amount, that fact shall be separately indicated in the said statement, and

(iv) where, as respects part of the relevant payment, the amount of the income tax which the company would otherwise be entitled to deduct is, in accordance with subsection (2) (b), reduced by one-half of such amount, that part shall be separately indicated in the said statement.

(2) (a) Where a dividend is paid wholly or in part out of the profits and, as respects such dividend, the dividend period is wholly within a period (hereafter in this Chapter referred to as the first term) of forty-eight months beginning on the commencement day, the company shall be entitled to deduct income tax in accordance with section 456 from such part, if any, of the dividend as exceeds the relevant payment, but shall not be entitled to deduct income tax from the relevant payment.

(b) In every other case in which a dividend is paid wholly or in part out of the profits, the company shall be entitled to deduct income tax from the dividend in accordance with section 456 provided, however, that—

(i) where the dividend period is wholly within a period (hereafter in this Chapter referred to as the second term) of forty-eight months beginning on the day next following the last day of the first term, the amount of the income tax which the company would otherwise be entitled to deduct from the relevant payment under section 456 shall be reduced by one-half of such amount, and

(ii) where the dividend period is not wholly within the second term—

(I) the amount of the income tax which the company would otherwise be entitled under section 456 to deduct from any part of the relevant payment which is referable to any part of the dividend period within the second term shall be reduced by one-half of such amount, and

(II) the company shall not be entitled to deduct income tax from any part of the relevant payment which is referable to any part of the dividend period within the first term.

(3) (a) Where the relevant payment is made wholly out of the profits of a dividend period wholly within the first term, it shall not be included in a statement of total income for the purpose of any relief or repayment under this Act or for the purpose of sur-tax.

(b) Where part of the relevant payment is referable to a part of a dividend period within the first term, that part of the relevant payment shall not be included in a statement of total income for the purposes aforesaid.

(c) Where—

(i) the relevant payment is made wholly out of the profits of a dividend period wholly within the second term, or

(ii) part of the relevant payment is referable to a part of a dividend period within the second term,

then, notwithstanding anything contained in this Act—

(I) no relief or repayment in respect of the income tax, which in accordance with subsection (2) (b) the company is entitled to deduct from the relevant payment or, as the case may be, the part of the relevant payment, shall be allowed at a rate greater than the rate at which, having regard to subsection (2) (b), the company is entitled to deduct income tax from the relevant payment or, as the case may be, the part of the relevant payment, and

(II) the relevant payment or, as the case may be, the part of the relevant payment shall be included in any statement of total income for the purpose of sur-tax to the extent only of one-half thereof.