Section 58 : Provision restricting reduction of dividend tax

1) An arrangement made by any entity upon maintaining all of the following arrangements shall be deemed to have made an arrangement made for reducing dividend tax:-

a) Where the profit of such entity is reserved, current or expected,

b) Where any person who acquires an interest in the entity and the recipient of the interest or his/ her associated person makes any payment to the present or previous beneficiary of the entity or his associated person, irrespective of whether or not it is related to the acquisition of interest and whether or not it is made at the time of acquisition of interest,

c) Where the payment is fully or partly reflected in the profits of the entity, and

d) Where the entity distributes dividends to the recipient of interest after the recipient of interest has acquired interest from the entity and the profits cover the dividends fully or partly.

2) If dividends are distributed by any entity under an arrangement reducing dividend tax made pursuant to sub-section (1), the arrangement shall be deemed to be as follows:-

a) Payment made by the recipient of interest or his/her associated person shall not be deemed as payment made by that person but as distribution by that entity of dividends to the previous or present beneficiary as referred to in clause (b).

b) The dividends distributed by that entity to the recipient of interest shall be deemed as equal to a sum to be set by subtracting the amount of payment said to have been made from the dividends as referred to in clause (a).