Dividend definition excludes post-31 March 1948 capital gains distribution, so shareholders were not taxed on the amount as income.

The definition of "dividend" under section 2(6A) of the Income-tax Act, 1922, included distributions from accumulated profits, but the Explanation and proviso expressly excluded capital gains arising after 31 March 1948 from that pool. The inclusive wording could not override the specific statutory exclusion, and a distribution attributable to those excluded capital gains could not be treated as dividend merely by popular understanding. Accordingly, the shareholders' proportionate share of capital gains was not includible in their total income as dividend for the assessment year 1949-50 and remained exempt in their hands.

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Issues: Whether the proportionate share of capital gains distributed by the company to its shareholders was includible in the shareholders' total income as dividend for the assessment year 1949-50.

Analysis: The definition of "dividend" in section 2(6A) of the Income-tax Act, 1922, included distributions out of accumulated profits, but the Explanation and proviso expressly excluded capital gains arising after 31 March 1948 from "accumulated profits". The inclusive character of the definition could not be used to override that express exclusion. A distribution falling within the excluded capital gains period could not be treated as dividend in popular parlance so as to attract tax when the statute itself withheld that character.

Conclusion: The amount representing the shareholders' proportionate share of capital gains was not taxable as dividend income and was rightly held to be exempt in the hands of the assessees.

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