Court emphasizes assessable profits for relief under section 80K, requires profits from eligible ships.

The court dismissed the reference, affirming that relief under section 80K is dependent on profits and gains derived by the company from a ship, eligible for deduction under section 80J. The court stressed the requirement of assessable profits in the company for shareholders to seek relief under section 80K. It highlighted the significance of the term "attributable" in determining the income eligible for relief and allowed the assessee to establish the company's profits for further review by the Tribunal, failing which the Tribunal's decision would stand.

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Issues:
1. Exemption claim under section 80K of the Income-tax Act for dividends received by the assessee from a company.
2. Eligibility of the company for deduction under section 80J.
3. Entitlement of the assessee to relief under section 80K based on dividends received from the company.

Analysis:
1. The assessee claimed exemption on dividends under section 80K of the Income-tax Act for the assessment years 1968-69 to 1970-71, based on a provisional certificate issued by the Income-tax Officer assessing the company. However, assessments were later reopened, and the Income-tax Officer included the dividends in the assessee's total income, denying the exemption. The Appellate Assistant Commissioner and the Tribunal upheld the denial, stating that since the company was not entitled to a deduction under section 80J, the shareholders could not claim relief under section 80K. The Tribunal concluded that no interference was warranted, and the appeals were dismissed.

2. The Tribunal found that the company was not entitled to a deduction under section 80J for the relevant assessment years. Section 80J allows a deduction from profits and gains derived from an industrial undertaking or a ship. The Tribunal held that since there were no assessable profits in the company, no relief under section 80K could be granted to the shareholders. The Tribunal's decision was based on the interpretation that relief under section 80K is contingent upon profits and gains derived by the company from a ship, for which a deduction under section 80J is available.

3. The court emphasized the importance of the term "attributable" in section 80K, which determines the character and quantum of income eligible for relief. The court considered arguments by the assessee's counsel that the company had commercial profits, making the shareholders eligible for relief under section 80K. However, the court held that without assessable profits from the ship in the relevant years, no part of the dividends could be attributed to such profits. Relying on Supreme Court judgments, the court concluded that relief under section 80K is tied to assessable profits derived by the company, as per the provisions of section 80J. The court granted liberty to the assessee to establish the company's profits for consideration by the Tribunal, failing which the Tribunal's order would stand.

In conclusion, the court dismissed the reference, emphasizing that relief under section 80K is contingent upon profits and gains derived by the company from a ship, for which a deduction under section 80J is available. The court highlighted the need for assessable profits in the company for shareholders to claim relief under section 80K.

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