Dividend distribution must be actual or constructive, not merely declared, for rebate withdrawal purposes.

For withdrawal of rebate under the relevant proviso, the High Court held that "distributed to its shareholders" means dividends actually or constructively distributed, not merely dividends declared. The word "distributed" was treated as distinct from "declared" and requiring an actual transfer of benefit, which may be by payment or constructive credit to shareholders. On the facts, only the amount actually distributed could be considered for rebate withdrawal, so the larger sum declared at the annual general meeting was excluded and the assessee succeeded on the referred question.

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Issues: Whether, for the purpose of withdrawing rebate under clause (c) of the second proviso to Para. D of Part II of the First Schedule to the Finance Act, 1959, the words "distributed to its shareholders ... dividends" mean dividends actually or constructively distributed, or merely dividends declared.

Analysis: The expression "distributed" was held to be distinct from "declared" and to denote something actual, though not necessarily physical. Distribution may be effected either by actual payment or by constructive credit to the shareholders. On the facts, only the amount actually distributed to shareholders could be taken into account for the rebate withdrawal, and not the larger sum merely declared at the annual general meeting.

Conclusion: The words "has distributed to its shareholders ... dividends" do not mean "has declared dividends". Only Rs. 47,000 was distributed, not Rs. 1,05,000, and the assessee succeeded on the question referred.

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