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Preference Shares (Regulation of Dividends) Act, 1960


3. Regulation of dividends on preference shares in certain cases

(1) Where the stipulated dividend in respect of a preference share of a company issued and subscribed for before the lst April, 1960-

(a) is specified to be free of income-tax and no deduction is made there from on account of the income-tax payable by the company; or

(b) was being paid before the lst April, 1960, without any deduction there from on account of the income-tax payable by the company, notwithstanding the absence of any specification that the dividend would be free of income-tax, every such share shall, as respects dividends declared after the commencement of this Act, carry a preferential right to be paid without any deduction aforesaid such amount as would exceed the stipulated dividend by thirty per cent thereof.

(2) Where the stipulated dividend in respect of a preference share of a company issued and subscribed for after the 31st March, 1959, and before the 1st of April, 1960, is free of income-tax and the company, besides paying the stipulated dividend to the holder of such share pays to government on his behalf any sum on account of income-tax payable thereon, then every such share shall, as respects dividends declared after the commencement of this Act, carry a preferential right to be paid free of income-tax such amount as together with the sum aforesaid would exceed the stipulated dividend by thirty per cent thereof.

(3) Where the stipulated dividend in respect of a preference share of a company issued and subscribed for before the lst April, 1960-

(a) is specified to be subject to income-tax and a deduction is made there from on account of the income-tax payable by the company; or

(b) was being paid before the lst April, 1960, subject to a deduction there from on account of the income-tax payable by the company, notwithstanding the absence of any specification that the dividend would be subject to income-tax, then every such share shall, as respects dividends declared after the commencement of this Act, carry a preferential right to be paid subject to the deduction aforesaid such amount as would exceed the stipulated dividend by eleven per cent thereof.

(4) Where a company has, in relation to a preference share issued and subscribed for before the lst April, 1960, declared-

(a) after the 31st March, 1959, and before the lst July, 1960, a dividend in respect of a previous year relevant to its assessment year 1960-61 or a subsequent assessment year, or

(b) after the 30th June, 1960, and before the commencement of this Act, a dividend in respect of any previous year.

it shall declare, in respect of the said previous year, an additional dividend of such amount as, together with the dividend already declared, would exceed the stipulated dividend-

(i) by thirty per cent of the stipulated dividend in the cases referred to in sub-section (1), or

(ii) by eleven per cent of the stipulated dividend in the cases referred to in sub-section (3).

(5) For the purpose of sub-section (1), sub-section (3) and sub-section (4), any reference therein to the stipulated dividend shall, in respect of a preference share issued and subscribed for on or before the 31st March, 1959, be construed as a reference to the stipulated dividend as on that day.

(6) For the removal of doubts, it is hereby declared that any reference in this section and section 4A to deduction made from a dividend "on account of the income-tax payable by the company" does not include any amount deducted by the company from that dividend under section 194 of the Income Tax Act, 1961 (43 of 1961).



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