66. Certain undistributed profits to be treated as distributed

Where in the case of a company the Assessor is satisfied that the company has not distributed to its shareholders a reasonable part of its profits for any year of assessment, the Assessor may, subject to the provisions of subsections (2), (3) and (4) of this section, treat the whole or a part of the profits of the company, after deducting therefrom any expenditure incurred for the development of the business of the company, (other than the price paid for the purchase of an existing business or an agricultural undertaking), as distributed in the form of dividends to the shareholders of the company, on a date specified by the Assessor.

In determining under subsection (1) whether a company has not distributed to its shareholders a reasonable part of its profits, the Assessor shall have regard to—

For the purposes of subsection (1), any of the following sums shall be regarded as profits available for distribution among the shareholders of the company, and not as having been applied or being applicable to the requirements of the company’s business or to such other requirements as may be necessary or advisable for the maintenance and development of that business, namely–

For the purpose of subsection (3), any share or loan capital or debt shall be deemed to be issued or incurred otherwise than for adequate consideration, if it is issued or incurred—

Where the Assessor under subsection (1) treats the whole or part of the profits of the company for any year of assessment as distributed in the form of dividends to shareholders of the company, such company shall be liable to pay income tax for that year of assessment on the profits treated as so distributed, at the highest rate at which income tax is chargeable for that year upon the taxable income of an individual, and such tax shall–

Where a company referred to in subsection (1) is being wound up in pursuance of an order made by a court or a resolution passed in that behalf by the shareholders of the company, then the balance of the income after payment of income tax in the year of assessment in which such winding up commences and for each subsequent year of assessment until such winding-up is completed, shall be regarded as income distributed as dividends to such shareholders.