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Issues: Whether an interim dividend resolved by the board of directors before the relevant previous year but paid during that year could be treated as a declaration of dividend so as to attract the reduction of rebate under the Finance Act, 1964.
Analysis: The rebate under the Finance Act, 1964 is reducible where dividend is declared or distributed to shareholders during the previous year. Explanation 3 protects cases where dividend is declared before the commencement of the previous year and distributed during that year. The distinction between dividend declared by a company in general meeting and interim dividend paid by the board is material. Under the Companies Act, a company in general meeting declares dividend, whereas the board may only pay interim dividend under Table A. A board resolution to pay interim dividend does not create an enforceable debt or amount to a declaration by the company in general meeting. The relevant event for interim dividend is therefore its distribution, not a declaration by the company.
Conclusion: The board resolution did not amount to a declaration of dividend by the company. The dividend was distributed in the relevant previous year, and the rebate was rightly reduced. The question was answered in the affirmative and in favour of the Revenue.
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