Financial Daily from THE HINDU group of publications
Monday, Oct 11, 2004
Financial Daily from THE HINDU group of publications Monday, Oct 11, 2004 |
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Mentor
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Taxation Columns - For the Asking Dividends for dummies
Debrati Bezbaruah, Cuttack No. Historically, in India, dividend is expressed as a percentage of par value of share. In your case the par value is Rs 10 per share and the company has paid you Rs 5 per share which is 50 per cent of the par value. I can sympathise with you. You were expecting an ROI of 50 per cent, whereas what you got is an ROI of just over 11 per cent. The market enthusiasts have it that when one invests in equity, he should not pin his hopes on dividend — instead he should collect his reward from the market. This he can do by disposing of his shares at a hefty price when the share does well in the secondary market. In short, the potential reward for one paying premium to a company comes not from the company but from the market. This is ironical given that the premia has gone to swell the coffers of the company. But then, one has to live with this. It would be conducive to transparency if SEBI asked listed companies to disclose the percentage the figure of total dividend declared assumes in relation to the aggregate of share capital and share premium. In the light of such disclosure, the investors may not be overawed by screaming, if misleading, headlines as to whopping dividends that translate into paltry ROI for investors, especially the investors in the primary market.
Stock split vs bonus issue
Sudarshan Rangachari, Chennai They are seemingly similar inasmuch as under both, the investor ends up with more number of shares without having to pay for the additional shares but there are vital differences. In a bonus issue, the paid-up share capital of the company increases. For example, if it is a 1:1 bonus, the paid-up share capital would double. But in a stock-split, the paid-up share capital remains as it is with the quantum of shares alone undergoing an increase or decrease. For example, if the share capital of a company is Rs 100 comprising 10 crore shares with a face value of Rs 10 each, it will remain Rs 100 crore if the face value is halved to Rs 5. But the quantum of shares would now be 20 crore. In the US, the investors look at bonus issues with disdain — they equate it with stock split and not as a financial reward. This is because both cause dilution in the market value following increase in the quantity of shares. Stock splits are resorted to in order to make the shares affordable in the market. A Rs 5 share quoting at Rs 7,000 may well quote at Rs 1,400 when it is converted into five shares with a par value of Re 1 each.
Certificates in transit
R. M. Subramaniam, e-mail Section 155(14) enjoins upon the assessing officer the duty to grant refund when TDS certificates which were not attached with the return are produced to him within two years from the end of the relevant assessment year. There is, therefore, no need for a revised return. Revised return is intended to correct any omission or any wrong statement when they are discovered subsequent to the filing of the original return. When TDS certificates are not attached for the simple reason they have not been received, it is not an act of omission. On the contrary, it is a deliberate but unavoidable act. In any case, the time limit for revised return is one year from the end of the relevant assessment year whereas Section 155(14) gives two years from the end of the relevant assessment year. Don't shoot yourself in the foot.
Maximum limit
Murali Manohar, e-mail Schedule XIII springs from the provisions of Sections 198, 269, 310 and 311. All these sections are applicable to public companies alone. Therefore, the restriction imposed by Section III of Part II of Schedule XIII, limiting the remuneration from more than one company to the maximum one could have drawn from a single company, applies only to remunerations from public companies. However, in terms of Section 309(6), no working director of a public company drawing commission therefrom shall be eligible to receive any remuneration from its subsidiary. Therefore, in the instant case, if the private companies are not subsidiaries, the MD can draw remuneration as per Schedule XIII from the public company as well as remuneration from the private companies, with the latter being untrammelled by the provisions of Schedule XIII. If, however, he happens to be receiving commission from the public company and the private companies he is the director of are the former's subsidiary, he cannot draw any remuneration at all from such subsidiaries.
(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)
S. Murlidharan
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