Capital receipt from share realisation and full dividend-linked relief under section 49B were both upheld for the assessee.

An investment company's mere realisation or variation of share investments did not, on the facts found, convert the resulting surplus into business income; the surplus was therefore capital in nature and not assessable as business profit. Relief under section 49B was held to extend to the full dividend attributable to agricultural income-tax assessed profits, because the statutory base was the dividend so attributable and not a reduced amount after apportioning expenditure. Both questions were answered in favour of the assessee.

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Issues: (i) Whether the surplus derived by the assessee from sale of shares was assessable as business profit; (ii) whether the assessee, being a company, was entitled to relief under section 49B on the full dividend amount received by it.

Issue (i): Whether the surplus derived by the assessee from sale of shares was assessable as business profit.

Analysis: The Tribunal's finding was that the assessee was an investment company and that the sales of shares were not effected as part of any share-dealing business. The governing principle applied was that a mere variation or realisation of investments does not ipso facto convert the resultant surplus into business income. The Court treated the question as one primarily of fact, and since the revenue did not establish that the Tribunal's factual findings were perverse, unsupported by evidence, or based on any misdirection in law, those findings were accepted.

Conclusion: The surplus was capital in nature and was not assessable as business profit; the issue was decided in favour of the assessee.

Issue (ii): Whether the assessee was entitled to relief under section 49B on the full dividend amount received by it.

Analysis: Section 49B granted relief to a shareholder in respect of dividend attributable to profits assessed to agricultural income-tax in the hands of the dividend-paying company, and the quantum of relief was to be worked out on the dividend attributable to such profits. The construction adopted by the revenue, limiting relief to a reduced base after proportionate expenditure allocation, was rejected because the statutory language tied the relief to the dividend attributable to agricultural income-tax assessed profits. The Court followed the interpretation that the full attributable dividend amount formed the relevant base for the company-shareholder's relief.

Conclusion: The assessee was entitled to relief on the full amount of the dividend attributable under section 49B; this issue was decided in favour of the assessee.

Final Conclusion: Both referred questions were answered in the assessee's favour, and the reference was answered accordingly.

Ratio Decidendi: Where an investment company merely realises or varies its investments without clear evidence that the transactions were part of its share-dealing business, the resulting surplus is capital rather than business income; and relief under section 49B must be computed on the dividend attributable to agricultural income-tax assessed profits as statutorily provided.

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