Commentary on Sections Overview Overview
1777.This Chapter contains provisions about the treatment of the difference between the sale price and the repurchase price in relation to sale and repurchase agreements. It is based on sections 730A and 730B of ICTA, with supplementary provisions based on section 737E of ICTA.
1778.Section 737A of ICTA deals with repos which straddle an ex-dividend date; if it applies, there is a deemed manufactured payment to which Schedule 23A to ICTA applies. Section 737A is rewritten in Chapter 4 of this Part.
1779.For the purposes of section 730A of ICTA, by contrast, it does not make any difference whether the repo straddles an ex-dividend date, and section 730A does not have a direct connection with Schedule 23A. If a sale and repurchase agreement is within section 730A, the difference between the sale price and the repurchase price is deemed to be a payment of interest on a deemed loan. If the other conditions are met, this deemed interest may come within the withholding obligation of section 349(2) of ICTA. Section 349(2) is rewritten in Chapter 3 of Part 15 (deduction of income tax at source: deduction from certain payments of yearly interest).