Dear all,
As per the provisions in the Companies (Transfer of Profits to Reserves)Rules,1975, it is not required to transfer profits to reserves if the amount of dividend declared is less than 10 % percent. The phrase ' not required to' does not make it mandatory for a company to prohibit from transferring profits to reserves. Had it been written that the company 'shall not' or 'cannot' transfer its profits to reserves then it would have been a mandatory clause. So, on this basis, will it not be right for a company to transfer its entire profits for the year to general reserve instead of keeping a balance in the profit and loss account? Kindly provide any clarification for this.
CAclubindia
