Liquidation distribution treated as dividend under income-tax law, permitting recomputation of company rebate.

For the purpose of section 35(10) of the Income-tax Act, 1922, a distribution made by a liquidator to shareholders on liquidation was treated as a dividend because the statutory definition of dividend expressly included distributions out of accumulated profits on liquidation. The use of the word "declaring" in section 35(10) did not exclude liquidation distributions from that meaning, and the deeming provision had to be given full effect in context. The Income-tax Officer was therefore entitled to recompute the rebate originally allowed to the company.

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Issues: Whether, for the purpose of section 35(10) of the Income-tax Act, 1922, distribution made by a liquidator to shareholders on liquidation could be treated as a dividend so as to attract recomputation of rebate originally allowed to the company.

Analysis: Section 35(10) applied where rebate of income-tax had been allowed on a part of the company's total income and the amount on which rebate was allowed was later availed of for declaring dividends. The definition of "dividend" in section 2(6A)(c) expressly included distribution to shareholders out of accumulated profits on liquidation. There was no repugnancy between the charging provision and the definition clause, and the word "declaring" in section 35(10) did not justify excluding liquidation distributions from the statutory meaning of dividend. A deeming provision must be given its full effect in the statutory context.

Conclusion: Distribution by a liquidator on liquidation fell within the statutory concept of dividend for section 35(10), and the Income-tax Officer was entitled to recompute the rebate. The petition failed.

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