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1998 (1) TMI 70 - SC - Income TaxWhether the sum of Rs. 3,39,000 declared as dividends on December 6, 1962, by the board of directors, but payable only on January 16, 1963, could be taken into account in withdrawing the rebate admissible under the first proviso to the Finance Act of 1964 by reference to sub-clause (c) of clause (i) of the second proviso to the same Act read with Explanation 3 to the same Act ? Held that:- The nature of the interim dividend is such, that it gives no right to the shareholders to receive it merely on the passing of the resolution by the board of directors, whereas on a dividend being declared by the company in general meeting, a vested right accrues to the shareholders. This being so, if the company in general meeting had declared a dividend on December 6, 1962, and the same was distributed in January, 1963, then the aforesaid Explanation 3 would have been applicable. But, in the present case, the decision of the board of directors on December 6, 1962, to pay interim dividend cannot be construed as meaning declaration of dividend by the company. This being so, what would be relevant is the distribution of the dividend in January, 1963, thereby attracting the provisions of sub-clause (c) of clause (i) of the second proviso and the income-tax authorities were therefore right in reducing the rebate in the manner in which they did for the assessment year 1964-65. For the aforesaid reason, the appeals are allowed. The judgment of the High Court is set aside. The question of law, as reframed by the High Court, is answered in the affirmative and in favour of the Revenue.
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