Judgment

Kirpal, J.-These appeals arise by virtue of a certificate having been granted by the Madras High Court under Section 261 of Income Tax Act, 1961 and the common questions of law referred relate to the interpre­tation of Section 2(22) of Income Tax Act, 1961 (hereinafter referred to as “the Act”).

2. Briefly stated, the facts are that the respondents-assesses were share-holders of Tinnevely Motor Service Company Private Limited. The road transport business of the respondents was taken over by the then State of Madras as a result of which the said company went into volun­tary liquidation on 28.3.1970. After the sale of its assets the liquidator distributed the first dividend on 31.3.1970 at the rate of Rs. 100/- per share, the second dividend on 17.4.1970 at the rate of Rs. 40/- per share and the third dividend on 20.10.1971 at the rate of Rs. 25/- per share. In the assessment of several share-holders, the income-tax Officer held, inter alia, that the accumulated profits of the company on the date of liquidation amounted to Rs. 6,61,065/-. Based on this figure, the income-tax officer treated 17.5 per share as dividend for the year 1970-71 and 57.75 of the dividend of Rs. 40/-