ATTITUDE OF COMPANY.

Taranaki Daily News, 9 March 1932, Page 12

ATTITUDE OF COMPANY.

To this, the general manager of the company, Mr. A. I. Johns, replied that the capitalfeation from reserves was not set out in the return because it was not considered as a dividend paid to the shareholders during the period; that it was not considered to come within the meaning of'Section 6 in the sense contemplated by the section; that no shareholder had any. right whatever to receive a demand payment of the said amount >of 4s. a share, as the declaration of the dividend referring thereto was restricted to the amount being applied for one purpose only, namely, that of liquidating a simultaneous call of the same amount made for the purpose of extinguishing the uncalled liability in respect’of his shares; that the dividend was merely a capitalising operation made solely for the extinguishment of this uncalled liability, and effected in the manner indicated instead of through the channel of the reduction of the company’s. capital per medium of the Court; that beyond the extinguishment of- this uncalled. liability a shareholder. derived, no benefit whatever from the operation, referred to; nor did the same affect in any way the market value of the shares after it had come into force. » On’February 19 the Commissioner advised the company that he had decided that the capitalisation of 4s. a share came within section 6 (2) (c) of ; the Land and Income Tax Amendment Act, 1931. He proposed, to treble the figures shown in the cbmpahy’s lists to arrive at the correct ’ amount in each shareholder’s case, except those in which a shareholder had bought or sold some of the shares during the year. In the case of the latter class a supplementary list was sought showing the full amount of dividend, including the 4s. capitalisation, derived by them during the year ended March 31, 1931. Shareholders are now . being advised accordingly. It should be noted that the ruling of the Commissioner does not mean that the 4s. capitalised will be subjected to direct tax, t|ut that it will be treated in the same waj, as the 2s. dividend, viz., added to the total income for the purpose of fixing the rate of tax.. By in,creasing the rate of tax applicable to the taxable income the total tax payable will, of course, be increased.