Question

Assertion (A): Tax benefits are available on dividend paid on preference shares.

Reason (R): Dividend paid on preference shares is an appropriation of profits.

Options

• Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation of Assertion (A).

• Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is True but Reason (R) is False.

• Assertion (A) is False but Reason (R) is True.

Answer 1

Assertion (A) is False but Reason (R) is True.

Explanation:

• Assertion (A): False – No tax benefits are available on dividends paid on preference shares because dividends are not treated as an expense for tax purposes.
• Reason (R): True – Dividend on preference shares is indeed an appropriation of profits, not a tax-deductible expense.