Doubt in ca final law - pls reply
poojaty12 (student) (47 Points)
25 April 2016poojaty12 (student) (47 Points)
25 April 2016
rahul
(none)
(91 Points)
Replied 25 April 2016
Hi,
It means the 100% govt. owned companies cannot declare dividends out of accumulated reserves.
poojaty12
(student)
(47 Points)
Replied 25 April 2016
thanks for your reply.. but i think they can declare dividend without complying with other conditions prescribed in rule 3..
rahul
(none)
(91 Points)
Replied 25 April 2016
Hi,
No they cannot. Here's why :
1) The general provisions in Section 123 state that dividend can be paid out of profits of the current year or of previous years (Read: Accumulated balance in P&L a/c which was not transferred to any reserve).
2) Second Proviso to section 123 states that companies can give dividends out of Free Reserves after following the condition laid down in Rule 3.
The proviso is a relaxation given to companies to declare dividends out of Free Reserves.
Now after the amendment this proviso is not applicable to 100% owned government companies. So the only section governing these companies is the Section 123 itself which does not allow payment out of reserves.
Regards
Rahul
CA Anand Kumar
(Practicing)
(151 Points)
Replied 25 April 2016
AakashKapadia
(Chartered Accountant )
(123 Points)
Replied 04 May 2016
I agree with Rahul, he is absolutely correct .
Such Govt. companies cannot declare dividend owing to inadequacy of profits now onwards after the amendment.
REFER RTP MAY2016 for such question!