Commentary on Sections Overview Overview Section 132: Dividends etc granted by industrial and provident societies
509.This section ensures that a “divi” paid by an industrial and provident society is allowed as a trading deduction. It is based on section 486 of ICTA.
510.The main rules about industrial and provident societies are in Chapter 5 of Part 6 of this Act (loan relationships).
511.A definition of “registered industrial and provident society” is inserted into section 834(1) of ICTA (see Schedule 1).
512.Subsection (1) sets out the sort of society to which the section applies. An example is an agricultural co-operative that sells (or buys) on behalf its farming members.
513.Subsection (2) is the trading income rule. In practice it is likely that the payments with which the section is concerned would be allowable under the normal trading income rule. But this section puts the matter beyond doubt.
514.The source legislation refers to the calculation of any profits “for the purpose of any provision of the Tax Acts relating to profits chargeable under Case I of Schedule D”. It is probable that the quoted words, read with sections 21A and 21C of ICTA, apply the rule for the purpose of a calculation of Schedule A profits. But, in the context of a property business, a “divi” is not paid “on account of the recipient’s transactions with the society”. So in practice the rule does not apply to a property business and the section refers simply to calculating the profits of the trade.
515.Subsection (5) is a signpost to the rule (inserted into ICTA by Schedule 1) that the “divi” is not a distribution.