Section 53 : Distribution by entity:
1) The following matters have to be included in the distribution to be made by an entity:-

a) Payment made by the entity to any of its beneficiaries in any capacity, or

b) Capitalization of profits.

2) Notwithstanding anything contained in Sub-section (1), any payment referred to in clause (a) of that Sub-section shall be deemed to have been distributed only in the following circumstances:-

a) Where the payment exceed the amount paid by a beneficiary to the entity in exchange for a consideration likely to be obtained from the entity, and

b) Where the following amounts are not included in the payment:-

(1) The amounts included in computing the income of the beneficiary,

(2) The payments from which tax has been deducted finally except for reason of distribution.

3) Only if the distribution of any entity reduces the value of property or liability of that entity, such distribution shall be deemed to be a distribution of profits or return of capital.

4) In any of the following circumstances, a distribution of any entity shall be deemed to be a distribution of profits, subject to Section 55:-

a) Where the distribution is of a type referred to in Sub-section (3) and the amount as per the market value of the property exceeds the total amount of capital contribution consisting of the market value of the liability of the entity at the time of distribution and of capitalized profits, as well,

b) Where profits are capitalized.

5) The distribution referred to in Sub-section (3) shall be deemed to be a return of capital to the extent of non-distribution of profits.

6) The distribution of any entity shall be deemed to be a dividend of that entity to the extent of non-return of capital.

Explanation: For purposes of this Section, "capitalization of profits" means and includes any capitalization made by issuing bonus share or similar other interest or increasing the paid up sum of the interest of that entity or crediting the profits to the premium and capital account of that entity.