Dividend from stock-in-trade may retain business character for set-off despite residuary income classification.

Dividend income arising from shares held as stock-in-trade remained attributable to the assessee's business for purposes of carry-forward and set-off. The classification of that dividend under the residuary head of "income from other sources" did not, by itself, alter its source character where it arose from trading assets. Accordingly, the income was available for set-off against carried-forward business loss under the business-loss set-off scheme, and the reference was answered in favour of the assessee.

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Issues: Whether dividend income arising from shares held as stock-in-trade, though brought under the head "income from other sources" by section 12(1A), could still be treated as income from business for the purpose of set-off under section 24(2).

Analysis: The statutory heads of income are intended for computation of total income and do not exhaustively or rigidly delimit the source of income for every other provision. Dividend income from shares forming part of the assessee's trading assets had, before the insertion of section 12(1A), been treated as business income. The later classification of such dividend under the residuary head did not alter its essential character for the purposes of the carry-forward and set-off scheme in section 24(2), which speaks of profits and gains of any business, profession or vocation.

Conclusion: The dividend income was liable to be set off against the carried-forward business loss, and the question referred was answered in favour of the assessee.

Ratio Decidendi: For the purpose of provisions dealing with carry-forward and set-off, the classification of income under the computational heads does not conclusively determine its source character where the income arises from the assessee's business assets or trading operations.

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