This is the last of the capital gains sections. This deals with dividend stripping. It deals with tax avoidance by means of dividend stripping in relation to holdings in respect of which the company is not a dealing company. It extends the effect of section 138 so as to deny tax relief in respect of a capital loss where the value of a shareholding has been materially reduced by distributions passing from a company to a corporate shareholder having a 10 per cent holding or more in that company.

These are capital distributions.

Capital transactions.

After 6th April, 1974?

That is right. That is the basis mentioned in the Capital Gains Tax Bill Act.

You show an example there to section 139 and you say company A and then in brackets " which is not a dealing company ". Is that synonomous with a trading company as distinct from an investing company?

Yes.

Is " a dealing company " defined?

It must be.

Yes, a company, according to subsection (4) is a dealing company in relation to a holding if a profit on the sale of the holding would be taken into account in computing the company's trading profits.

Do we not all know all trading companies can have an investment portfolio as well?

It must be a trading company.

It could be a mixed one but it has to pay——

There must be a trading element.

Yes.

What we are dealing with here is a company which is not a dealing company and which disposes of shares in another company. Section 371 of the Income Tax Act, 1967, has provisions in relation to dealing companies.