Dividend definition includes liquidation distributions; recomputation and rectification can apply where relief was used to declare such dividends.

The note examines whether amounts distributed by a liquidator, which the statute defines as dividend when paid out of accumulated profits on liquidation, fall within the scope of a provision permitting recomputation and rectification where relief was earlier availed to declare dividends. It reasons that the statutory substitution and the deeming language must be applied according to their terms, that there is no textual or contextual repugnancy excluding liquidation distributions from the dividend definition, and therefore such distributions are within the operational scope of the recomputation mechanism as interpreted in the analysis.

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Issues: Whether section 35(10) of the Income-tax Act applies where amounts previously allowed rebate and later distributed by a liquidator on the company s liquidation are treated as "dividend" under section 2(6A), and thus whether the Revenue can claim recomputation under section 35(10) from the liquidator.

Analysis: Section 35(10) provides for deeming certain amounts, on being availed of by a company for declaring dividends, to be incorrect relief and empowers recomputation and rectification. The definition of "dividend" in section 2(6A) expressly includes distributions made to shareholders out of accumulated profits on liquidation (clause (c)). The 1955 56 amendments introduced the present subsection (10) and substituted the definition in section 2(6A), removing earlier provisos. There is no textual repugnancy or contextual reason to exclude the liquidation distribution language of section 2(6A)(c) when interpreting the phrase "for declaring dividends" in section 35(10). Pre-existing common-law authorities (e.g., Burrell) and some Bombay High Court decisions as to indistinction between capital and profits on liquidation do not displace the clear statutory definition enacted by the legislature. A deeming provision is to be applied according to its terms; where the statute defines "dividend" to include distributions on liquidation, those distributions fall within the scope of section 35(10) absent repugnancy, which is not present here.

Conclusion: Section 35(10) applies to distributions by a liquidator treated as "dividend" under section 2(6A); the Revenue is entitled to recomputation under section 35(10). The petition challenging application of section 35(10) is dismissed and the result is in favour of the Revenue.

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