Reserves and surplus capitalisation

Yes by way of Alloting Bonus Shares.

Yes by way of Alloting Bonus Shares.

Please note that tax is only on the profits of the company.  The balance to the Reserves & Surplus is after providing for taxation, dividends to equity & pref shareholders etc..  Hence by capitalizaing the reserves you cannot say that you are not liable to tax.  If the income of the company is taxable then it will be required to pay tax on it.  But no tax is required to paid on capitalization of reserves.

If the company has huge amounts of reserves, then in order to bring those reserves in line with the capital employed by the company,  the company capitalizes part of its reserves, by issuing bonus shares to the shareholders of the company.

Rgt to issue bonus shares..it just shifts taxation liability.