Dividend in kind is taxable at market value on entitlement, and an unsupported certificate cannot sustain an appeal.

Dividend received in kind may include property or rights with monetary value, and for income-tax assessment the relevant measure is the real income received by the shareholder in the year of entitlement. Where dividend is distributed in shares or other property, the asset is valued at its market value on the date the recipient becomes entitled to it; the distributing company's valuation does not control the recipient's assessment. The note also records that a High Court certificate unsupported by reasons is invalid, so an appeal founded solely on such a certificate is not maintainable.

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Issues: (i) Whether dividend received in kind by a shareholder company had to be valued at market value or face value for assessment under the Indian Income-tax Act, 1922. (ii) Whether the appeal filed on the strength of the High Court certificate was maintainable.

Issue (i): Whether dividend received in kind by a shareholder company had to be valued at market value or face value for assessment under the Indian Income-tax Act, 1922.

Analysis: Dividend need not be confined to cash and may include property or rights having monetary value. For assessment purposes, the relevant question is the real income received by the assessee in the relevant year. Where dividend is received in kind, the property received must be valued at its market value on the date the assessee became entitled to it. The valuation adopted by the distributing company does not control the assessment in the hands of the recipient, and an erroneous valuation in another assessment does not confer a right to a similar error in the assessee's assessment. The fact that the assessee retained the shares did not make the receipt any less an income.

Conclusion: The shares distributed as dividend were rightly assessable at their market value, and the assessee's contention based on face value was rejected.

Issue (ii): Whether the appeal filed on the strength of the High Court certificate was maintainable.

Analysis: The certificate granted by the High Court was unsupported by reasons and was therefore invalid. On that basis, the appeal founded on the certificate could not be maintained.

Conclusion: The certificate-based appeal was not maintainable.

Final Conclusion: The substantive question on dividend valuation was answered against the assessee, and the special leave appeal succeeded while the certificate appeal failed for want of a valid certificate.

Ratio Decidendi: Dividend received in kind is taxable in the hands of the recipient at its market value on the date of entitlement, and the recipient is not bound by the distributing company's valuation or by an erroneous assessment made in another person's hands.

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