79.
| (1) Where, in the case of a company controlled by not more than five persons,-
| | (a) the assessable income of the company for any year of assessment is computed on the profits of the company for any year ending on or after the first day of April, 1962, (hereafter in this subsection referred to as the " previous year"), and | | |
| | (b) the Assessor is satisfied that, in respect of the previous year, the company has not distributed to its shareholders a reasonable part of its profits, | | |
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| (2) 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 not only to the current requirements of the company's business but also to such other requirements as may be necessary or advisable for the maintenance and development of that business. |
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| (3) 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: -
| | (a) any sum expended or applied, or intended to be expended or applied, out of the profits of the company-
| | | (i) in or towards payment for the business, undertaking or property which the company was formed to acquire or which was the first business, undertaking or property of a substantial character acquired by the company, or |
| (ii) in redemption or repayment of any share or loan capital or debt (including any premium on such share or loan capital or debt) issued or incurred in or towards payment for any such business, undertaking or property, or issued or incurred for the purpose of raising money applied or to be applied in or towards payment therefor, or |
| (iii) in meeting any obligations of the company in respect of the acquisition of any such business, undertaking or property, or |
| (iv) in redemption or repayment of any share or loan capital or debt (including any premium on such share or loan capital or debt) issued or incurred otherwise than for adequate consideration, |
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| | (b) any sum lent to a director or shareholder of the company, and | | |
| | (c) any sum expended or applied, or intended to be expended or applied, in pursuance or in consequence of any fictitious or artificial transactions. | | |
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| (4) For the purposes of subsection (3), share or loan capital or debt shall be deemed to be issued or incurred otherwise than for adequate consideration if-
| | (a) it is issued or incurred for consideration the value of which to the company is substantially less than the amount of the capital or debt (including any premium thereon), or | | |
| | (b) it is issued or incurred in or towards, or for the purposes of raising money applied or to be applied in or towards, the redemption or repayment of any share or loan capital or debt which itself was issued or incurred for such consideration as is mentioned in paragraph (a) of this subsection or which represents, directly or indirectly, any share or loan capital or debt which itself was issued or incurred for such consideration, | | |
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| (5) 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. |
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| (6) Where under the preceding provisions of this section the whole or any part of the undistributed profits of a company is treated as distributed in the form of dividends, and any shareholder is assessable accordingly, the additional amount which becomes payable as tax by that shareholder by reason of the operation of that subsection shall be recoverable either from the shareholder or from the company as the Commissioner may in his discretion determine. |
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| (7) Where an Assessor is of opinion that any transaction which reduces or would reduce the amount of tax payable by any person is artificial or fictitious or that any disposition is not in fact given effect to, he may disregard any such transaction or disposition and the persons concerned shall be assessable accordingly. |
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| (8) Nothing in this section shall prevent the decision of an Assessor in the exercise of any discretion given to him by this section from being questioned in an appeal in accordance with the provisions of Chapter XII. |
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| (9) In this section-
| | (a) " disposition" includes any trust, grant, covenant, agreement, or arrangement, | | |
| | (b) " company controlled by not more than five persons" means a company in which more than half of the total shares issued is held by not more than five persons, their wives or minor children, either directly or through nominees. | | |
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Sri Lanka Consolidated Acts