Clause 2

Where a financial institution or an insurance company derives income which is subject to tax in accordance with regulations prescribed under section 43A or 43C of this Act, the following provisions shall have effect.(2) As soon as any amount of income of the financial institution or insurance company has been subject to tax at the rate of ten per cent or such other concessionary rate as may be prescribed under section 43A or 43C of this Act, the net amount of that income after deduction of the tax shall be credited to a special account (in this section referred to as “the account”) to be kept by the financial institution or insurance company for the purposes of this section.(3) Where the account is in credit at the date on which any dividends are paid by the financial institution or insurance company out of the net amount of that income after deduction of the tax, an amount equal to those dividends or to that credit, whichever is the less, shall be debited to the account.(4) So much of the amount of any dividends debited to the account as is received by a shareholder of the financial institution or insurance company shall, if the Comptroller is satisfied with the entries in the account, be exempt from tax in the hands of the shareholder.(5) Section 44 of this Act shall not apply to any dividends or part thereof debited to the account.(6) Where an amount of dividends debited to the account has been received by a shareholder, which is a holding company owning, at the time such dividends are received, not less than fifty per cent beneficial interest in the issued capital of the financial institution or insurance company, any dividends paid by the holding company to its shareholders, to the extent that the Comptroller is satisfied that those dividends are paid out of such amount, shall be exempt from tax in the hands of those shareholders; and section 44 of this Act shall not apply to any such dividends or part thereof.(7) A financial institution or an insurance company shall deliver to the Comptroller a copy of the account made up to any date specified by him whenever called upon to do so by notice in writing.(8) Notwithstanding the foregoing provisions of this section, where it appears to the Comptroller that —

any income of a financial institution or an insurance company which has been subject to tax at the rate of ten per cent or such other concessionary rate prescribed under section 43A or 43C of this Act; or

any dividend, including a dividend paid by a holding company under subsection (6) of this section, which has been exempted from tax in the hands of any shareholder,ought not to have been so taxed or exempted, as the case may be, the Comptroller may within the year of assessment or within twelve years after the expiration thereof —

make such assessment or additional assessment upon the financial institution or insurance company or any such shareholder as may be necessary in order to make good any loss of tax; or

direct the financial institution or insurance company to debit the account with such amount as the circumstances require.”.