J. DALMIA vs COMMISSIONER OF INCOME-TAX, NEW DELHI

The Supreme Court held that a mere resolution of the Board of Directors declaring an interim dividend does not create an enforceable debt against the company, as the directors can rescind the resolution before payment. The Court clarified that a dividend is considered 'paid' under Section 16(2) of the Indian Income-tax Act, 1922 only when the company discharges its liability and makes the amount unconditionally available to the shareholder. The judgment distinguished the case from Commissioner of Income-tax, Bombay v. Laxmidas Mulraj Khatau, emphasizing that the declaration of interim dividend does not operate as payment until the company has parted with the amount or fulfilled its obligation by another act.