Dividend income taxability turns on the shareholder's receipt, and foreign-company distributions can still be assessable as income.

An inclusive statutory definition of dividend was applied to determine taxability from the shareholder's perspective: the character of the receipt in the hands of the shareholder, not the source or character of the company's profits, controlled the assessment. Amounts remitted from a foreign company and described as dividends were treated as revenue receipts in the shareholder's hands, even if the distributing company's underlying profits were capital in nature. The foreign status of the company did not exclude the receipt from income-tax treatment. On that basis, the sums were held assessable as dividend income under the Indian Income-tax Act against the assessee.

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Issues: Whether amounts received by shareholders from a foreign company, described as dividends and remitted into the taxable territory, were assessable as dividend income under the Indian Income-tax Act.

Analysis: The definition of dividend in the Act is inclusive and is not confined to the ordinary notion of dividend. What matters is the character of the receipt in the hands of the shareholder, not the character of the profits in the hands of the company. Even if the company had distributed capital profits, the amount received by the shareholder on the footing of dividend was a revenue receipt in the shareholder's hands. The fact that the distributing company was a foreign company did not prevent the receipt from being treated as income taxable under the Act.

Conclusion: The sums received from the foreign company were assessable as dividend income under the Indian Income-tax Act, and the question was answered against the assessee.

Ratio Decidendi: For income-tax purposes, the taxability of a distribution depends on the nature of the receipt in the hands of the shareholder, and an inclusive statutory definition of dividend can cover distributions made by a foreign company even where the underlying profits are said to be capital profits in the company's hands.

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