The Preference Shares (Regulation of Dividends) Act, 1960

This Act may be called the Preference Shares (Regulation ofDividends) 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 theprovision of this Act relate to the regulation of dividends on preference shares of banking and insurancecompanies and financial corporations. 1[(3) Notwithstanding anything contained in sub-section (2) the provision of this Act shall, in theirapplication to the Union territory of Pondicherry, have effect subject to the modifications specified in theSchedule.]

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 2[clause (26) of section 2 of the Incometax Act, 1961 (43 of 1961) and includes a company referred to in sub-clause (ii) of clause (17)] of thesaid section which has made arrangements for the declaration and payment of dividends within Indianin accordance with the rules made under the said Act; (c) "preference share" means a share which 3*** carries, as respects dividends, a preferential rightto be paid a fixed amount or an amount calculated at a fixed rate; (d) "previous year" has the same meaning as in the 4[Income-tax Act, 1961 (43 of 1961)]; (e) "stipulated dividend", in relation to a preference share, means the fixed amount or the amountcalculated 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 CompaniesAct shall have the meanings respectively assigned to them in that Act.

(1) Where the stipulateddividend in respect of a preference share of a company 1[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 theincome-tax payable by the company, or (b) was being paid before the 1st April, 1960, without any deduction therefrom on account of theincome-tax payable by the company, notwithstanding the absence of any specification that thedividend would be free of income-tax, every such share shall, as respects dividends declared after the commencement of this Act, carry apreferential right to be paid without any deduction aforesaid such amount as would exceed the stipulateddividend by thirty per cent. thereof. (2) Where the stipulated dividend in respect of preference share of a company issued and subscribedfor after the 31st March, 1959 2[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 anysum on account of income-tax payable thereon, then, every such share shall, as respects dividendsdeclared after the commencement of this Act, carry a preferential right to be paid free of income-tax suchamount 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 company2[issued andsubscribed for before the 1st April, 1960]-- (a) is specified to be subject to income-tax and a deduction is made therefrom on account of theincome-tax payable by the company, or (b) was being paid before the 1st April, 1960, subject to a deduction therefrom on account of theincome-tax payable by the company, notwithstanding the absence of any specification that thedividend would be subject to income-tax, then every such share shall, as respects dividends declaredafter the commencement of this Act, carry a preferential right to be paid subject to the deductionaforesaid such amount as would exceed the stipulated dividend by eleven percent.thereof. (4) Where a company has in relation to a preference share 2[issued and subscribed for before the 1stApril, 1960] declared,-- (a) after the 31st March, 1959, and before he 1st July, 1960, a dividend in respect of a previousyear 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 ofany previous year, it shall declare, in respect of the said previous year, an additional dividend of such amount as, togetherwith 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). (5) For the purposes of sub-section (1), sub-section (3) and sub-section (4), any reference therein tothe stipulated dividend shall, in respect of a preference share issued and subscribed for on or before the31st March, 1959, be construed as a reference to the stipulated dividend as on that day. (6) For the removal of doubts, it is hereby declared that any reference in this section 2[and section 4A]to deduction made from a dividend "on account of income-tax payable by the company" does not includeany amount deducted by the company from the dividend under 3[section 194 of the Income-tax Act,1961(43 of 1961)].

1[Where any preference share of a company has been issued and subscribed for beforethe 1st April, 1960, and any portion of the profits and gains of the company] in respect of the relevantperiod is exempt from income-tax under the 2[Income-tax Act, 1961 (43 of 1961)], by reason of such portion being agricultural income, then, for the purpose of the increase in the dividend in relation to anysuch preference share under the provisions of section 3, the increase of thirty per cent. or eleven per cent.referred to therein shall be taken to be such proportion of the said thirty per cent. or eleven per cent. as thecase may be, as the total amount of the profits and gains of the company excluding the portion of theprofits and gains which is so exempt in respect of the relevant period bears to the total amount of theprofits and gains thereof in respect of that period. Explanation.-- For the purpose of this section, "relevant period", in relation to the profits and gains ofa company, shall mean-- (a) the previous years relevant to such of the three assessment years as immediately precede theassessment year ending on the 31st March, 1961, and in each of which the net result of thecomputation of profits and gains of the company has not been loss or where there are only two suchyears, such two years, or where there is only one such year, such one year; or (b) in any case where clause (a) is not applicable, the previous year relevant to the assessmentyear ending on the 31st March, 1961 or a subsequent assessment year immediately followingthereafter in which the net result of the computation of profits and gains has not been a loss.

1[4A. Deduction of income-tax.-- Where the stipulated dividend in respect of a preference share of acompany-- (a) is specified to be subject to income-tax and a deduction is made therefrom on account of theincome-tax payable by the company, or (b) is being paid subject to a deduction therefrom on account of the income-tax payable by thecompany, notwithstanding the absence of any specification that the dividend would be subject toincome-tax, 2[such deduction made by the company from any dividend declared after the 28th day of February, 1966shall in no case exceed twenty-seven and a half per cent. of the aggregate of-- (i) the stipulated dividend, and (ii) an amount equal to eleven per cent. of the stipulated dividend as specified in sub-section (3)of section 3.]]