Deemed dividend u/s 2(22)(d)

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Pankaj Khodaskar (Querist)
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05 August 2010 A private company has undergone Capital Reduction. The Scheme has been approved by the Court. As per the Scheme, a part of the paid up value of each share would be repaid to the shareholder. The relevant facts are as under:

Amount of capital to be repaid Rs 300

P&L Acc(as per latest audited a/c) Rs 140
Capital Redemption Reserve Rs 400

As per the Section 2(22)(d), any amount repaid under capital reduction, then to the extent of accumulated profits, capitalised or not, would be treated as Deemed Dividend.

In the given example whether the amount of CRR would be taken into account for the determining the amount of dividend on which DDT would have to be paid? Can CRR fall within the ambit of be treated as accumulated profits, capitalised or not, esp when it can be utilised for issue of bonus shares.

thanks in advance

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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05 August 2010 Since dividend cannot be distributed from CRR,my understanding is,CRR cannot be treated as accumulated profit for the purpose of section 2(22)d).

Pankaj Khodaskar

Pankaj Khodaskar (Querist)
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05 August 2010 Thanks

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