Doubt in ca final law - pls reply

Hi,

It means the 100% govt. owned companies cannot declare dividends out of accumulated reserves. 

thanks for your reply.. but i think they can declare dividend without complying with other conditions prescribed in rule 3..

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

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!