The meaning of dividend under section 2(22) 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 Supreme Court and Income Tax Appellate Tribunal tried to explain the meaning of dividend.
Meaning of dividend
The phrase ‘dividend‘ used in section 2(22) of the Income Tax Act came up before various high courts as detailed under :
1. Hon’ble Supreme Court explained the meaning of ‘dividend’ while delivering judgment in Kantilal Manilal vs. CIT  41 ITR 275 (SC) as under :
Meaning: Dividend’ is defined in section 2(6a) of the 1922 act [corresponding to section 2(22) of the 1961 act] as inclusive of various items and exclusive of various items. ‘Dividend’ in its ordinary meaning is a distributive share of the profits or income of a company given to its shareholders.
When the legislature by section 2(6a) sought to define the expression ‘dividend’, it added to the normal meaning of the expression several other categories of receipts which may not otherwise be included therein. By the definition in section 2(6a), ‘dividend’ means dividend as normally understood and includes in its connotation several other receipts set out in the definition.
2. Hon’ble Supreme Court explained the meaning of ‘dividend’ while delivering judgment in Hari Prasad Jayantilal & Co. vs. V.S. Gupta, ITO  59 ITR 794 (SC) as under :
Meaning: The word ‘dividend’ under section 2(6a)(e) of the 1922 act means dividend as ordinarily understood under the companies act, and also the head of payment or distribution specified therein.
3. Hon’ble Supreme Court explained the meaning of ‘dividend’ while delivering judgment in CIT vs. Nalin Behari Lall Singha  74 ITR 849 (SC) as under :
Meaning: Dividend’ in its ordinary connotation means the sum paid to or received by a shareholder proportionate to his shareholding in a company out of the total sum distributed. Dividend distributed by a company being a share of its profits declared as distributable among the shareholders is not impressed with the character of the profits from which it reaches the hands of the shareholders.
4. Hon’ble ITAT-Madras explained the meaning of ‘dividend’ while delivering judgment in Mrs. Sujatha venkateswaran vs. Asstt. CIT  61 ITD 485 (Mad. – Trib.) as under :
Meaning: The term ‘dividend’ under section 2(22) is defined in an inclusive manner which means dividend as ordinarily understood under the companies act and also the heads of payment or distribution specified therein.
Section 2(22) of Income Tax Act
2(22). “dividend” includes—
(a) any distribution by a company of accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company ;
(b) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits, whether capitalised or not ;
(c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not ;
(d) any distribution to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not ;
(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power,
or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits ;
but “dividend” does not include—
(i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ;
(ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, and before the 1st day of April, 1965 ;
(ii) any advance or loan made to a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ;
(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off;
(iv) any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A of the Companies Act, 1956 (1 of 1956);
(v) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company).
Explanation 1.—The expression “accumulated profits”, wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956.
Explanation 2.—The expression “accumulated profits” in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date of liquidation, but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place.
Explanation 2A.—In the case of an amalgamated company, the accumulated profits, whether capitalised or not, or loss, as the case may be, shall be increased by the accumulated profits, whether capitalised or not, of the amalgamating company on the date of amalgamation.
Explanation 3.—For the purposes of this clause,—
(a) “concern” means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company ;
(b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern ;
In this article, you can get guidance from high courts on the meaning of dividend under section 2(22) of the Income Tax Act.
Updated up to Finance Act 2021.