S.L. 123.176 Art. 5Where an undertaking claims a deduction in terms of rule 3.

(1) Where an undertaking claims a deduction in terms of rule 3 in calculating its total income for a year of assessment, the shareholder or partner, as the case may be, of the undertaking at the end of the year preceding the particular year of assessment shall be deemed to have received in that year an amount of income equal to the interest on risk capital claimed as a deduction by the undertaking for the said year of assessment.

(2) The income referred to in sub-rule (1) shall be characterised as interest for the purposes of the Act and all provisions relating to the taxation of interest income shall apply mutatis mutandis to such deemed income:

Provided that articles 32 to 42 of the Act shall not apply to such deemed income.

(3) Where the undertaking has more than one shareholder or partner at the end of the year preceding the year of assessment, each shareholder or partner, as the case may be, shall be deemed to have received an amount of deemed income as corresponds to the proportion of the nominal value of the risk capital pertaining to each shareholder or partner, as the case may be, holds in the undertaking at the end of the year preceding the year of assessment:

Provided that on a request from a shareholder or partner of an undertaking, as the case may be, the Commissioner may, if he deems fit, direct the shareholders or partners of the undertaking to divide the deemed interest income using an alternative basis.