Preference Shares (Regulation of Dividends) Act, 1960
No: 63 Dated: Dec, 28 1960
THE PREFERENCE SHARES (REGULATION OF DIVIDENDS) ACT, 1960
ACT NO. 63 OF 1960
An Act to regulate dividends on preference shares of certain companies.
BE it enacted by Parliament in the Eleventh Year of the Republic of India as follows:—
1. Short title and commencement.—(1) This Act may be called the Preference Shares (Regulation of Dividends) Act, 1960.
(2) It extends to the whole of India: Provided that it shall not apply to the State of Jammu and Kashmir except to the extend to which the provision of this Act relate to the regulation of dividends on preference shares of banking and insurance companies and financial corporations.
(3) Notwithstanding anything contained in sub-section (2) the provision of this Act shall, in their application to the Union territory of Pondicherry, have effect subject to the modifications specified in the Schedule.
2. Definitions.—In this Act, unless the context otherwise requires,—
(a) “Companies Act,” means the Companies Act, 1956 (1 of 1956);
(b) “company” means an Indian company as defined in clause (26) of section 2 of the Income-tax Act, 1961 (43 of 1961) and includes a company referred to in sub-clause (ii) of clause (17) of the said section which has made arrangements for the declaration and payment of dividends within Indian in accordance with the rules made under the said Act;
(c) “preference share” means a share which carries, as respects dividends, a preferential right to be paid a fixed amount or an amount calculated at a fixed rate;
(d) “previous year” has the same meaning as in the Income-tax Act, 1961 (43 of 1961);
(e) “stipulated dividend”, in relation to a preference share, means the fixed amount or the amount calculated at fixed rate which the holder of such share has a preferential right to be paid as dividend;
(f) all other word and expressions used but not defined in this Act and defined in the Companies Act shall have the meanings respectively assigned to them in that Act.
3. Regulation of dividends on preference shares in certain cases.—(1) Where the stipulated dividend in respect of a preference share of a company issued and subscribed for before the 1st April, 1960,—
(a) is specified to be free of income-tax and no deduction is made therefrom on account of the income-tax payable by the company, or
(b) was being paid before the 1st April, 1960, without any deduction therefrom on account of the income-tax payable by the company, notwithstanding the absence of any specification that the dividend would be free of income-tax,
every such share shall, as respects dividends declared after the commencement of this Act, carry a preferential right to be paid without any deduction aforesaid such amount as would exceed the stipulated dividend by thirty per cent. thereof.
(2) Where the stipulated dividend in respect of preference share of a company issued and subscribed for after the 31st March, 1959 and before the 1st April, 1960 is free of income-tax, and the company, besides paying the stipulated dividend to the holder such share, pays to Government on his behalf any sum on account of income-tax payable thereon, then, every such share shall, as respects dividends declared after the commencement of this Act, carry a preferential right to be paid free of income-tax such amount as together with the sum aforesaid would exceed the stipulated dividend by thirty per cent. thereof.
(3) Where the stipulated dividend in respect of a preference share of a company issued and subscribed for before the 1st April, 1960—
(a) is specified to be subject to income-tax and a deduction is made therefrom on account of the income-tax payable by the company, or
(b) was being paid before the 1st April, 1960, subject to a deduction therefrom on account of the income-tax payable by the company, notwithstanding the absence of any specification that the dividend would be subject to income-tax, then every such share shall, as respects dividends declared after the commencement of this Act, carry a preferential right to be paid subject to the deduction aforesaid such amount as would exceed the stipulated dividend by eleven per cent. thereof.
(4) Where a company has in relation to a preference share issued and subscribed for before the 1st April, 1960 declared,—
(a) after the 31st March, 1959, and before he 1st July, 1960, a dividend in respect of a previous year relevant to its assessment year 1960-61 or a subsequent assessment year, or
(b) after the 30th June, 1960, and before the commencement of this Act, a dividend in respect of any previous year, it shall declare, in respect of the said previous year, an additional dividend of such amount as, together with the dividend already declared, would exceed the stipulated dividend—
(i) by thirty per cent. of the stipulated dividend in the cases referred to in sub-section (1), or
(ii) by eleven per cent. of the stipulated dividend in the cases referred to in sub-section (3).