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Issues: Whether interim dividend declared by the directors could be treated as dividend "declared or distributed by the company" for computing the relevant amount of distributions of dividends under the Finance Act, 1968.
Analysis: The expression "declared or distributed by the company" in clause (b) of Explanation 1 to Paragraph F of the First Schedule to the Finance Act, 1968 was construed in the light of the legal nature of interim dividend. An interim dividend is authorised by the articles and is declared by the board of directors, not by the company in general meeting. A board resolution to pay interim dividend does not create a debt enforceable against the company until payment, and therefore such dividend does not answer the description of dividend "declared by the company" for the purpose of the charging provision.
Conclusion: The interim dividend of Rs. 7,50,000 could not be included in the computation for additional tax under the Finance Act, 1968, and the question was answered in favour of the assessee.
Ratio Decidendi: An interim dividend declared by the board of directors is not dividend "declared or distributed by the company" unless the statutory context clearly extends the expression to board-declared interim dividends.
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