Meaning of “Declared and distributed”

The meaning of declared and distributed under section 8 of the Income Tax Act is not defined in the act itself. But we can take guidance from decisions by various high courts. Here are excerpts of courts orders in which the Hon’ble High Court tried to explain the meaning of declared and distributed.

meaning of declared and distributed

Meaning of declared and distributed defined by court

The phrase ‘declared and distributed’ used in section 8 of the Income Tax Act came up before Hon’ble ITAT-Bombay in Nathani Steel (P.) Ltd. Vs. First ITO [1984] 10 ITD 112 (Bom.-Trib.) and it explained.

Meaning: The terms ‘distribution’ and ‘payment’ have been used in section 8 in respect of only those apportionments and disbursements which are not concerned with declaration of normal dividend as such. In cases of ‘deemed dividend’, there would not be any declaration. Those distributions and payments are not, strictly speaking, dividends in the commercial sense, but are deemed to be dividends by special definition for the limited purposes of levy of income-tax on shareholders.

Section 8 of Income Tax Act

Dividend income.

8. For the purposes of inclusion in the total income of an assessee,—

(a) any dividend declared by a company or distributed or paid by it within the meaning of sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22) of section 2 shall be deemed to be the income of the previous year in which it is so declared, distributed or paid, as the case may be ;

(b) any interim dividend shall be deemed to be the income of the previous year in which the amount of such dividend is unconditionally made available by the company to the member who is entitled to it.

In this article, you can get guidance from high courts on the meaning of declared and distributed under section 8 of the Income Tax Act.

Updated up to Finance Act 2021

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