Guidance on Liquidation Accounts: Unpaid Dividends, Tax Deductions, and Shareholders' Role as Contributories u/s 555(1.

The circular addresses the treatment of unpaid dividends and undistributed assets in a company's liquidation account, emphasizing the inclusion of fully paid shareholders as "contributories" under section 555(1). It clarifies that the term "dividend" in this context differs from its usual meaning in company law and may align with section 2(22)(c) of the Income-tax Act, 1961, if specific conditions are met. The circular advises that before a liquidator pays money into the liquidation account, they must deduct tax as per sections 194 and 200 of the Income-tax Act, 1961, or face potential action under section 201 for non-compliance.

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