Judgment

SHAH, J.- Sri Ganapathy Mills Co. Ltd. distributed dividend to its shareholders out of the business profits earned by it in the years ending December 31, 1953 and December 31, 1954. The Company, however, carried in its accounts a large balance of unabsorbed depreciation admissible under Section 10 (2) (vi) and Section 10 (2) (vi-a) of the Income-tax Act, and on that account it had no taxable income in the relevant assessment years 1954-55 and 1955-56.

2. In assessing the income of the shareholders for the assessment years 1955-56 and 1956-57 the Income-tax Officer rejected their claim for exemption from tax under S. 15-C (4) of the Income-tax Act, 1922, and brought the dividend income to tax. This order was confirmed by the Income-tax Appellate Tribunal.

3. The Tribunal referred the following question to the High Court of Madras for opinion:

"Whether on the facts and in the circumstances of the case, the assessees are entitled to the benefit of S. 15-C (4) in respect of the dividend income received from Sri Ganapathy Mills Co. Ltd., Tinnevelly?"

The High Court answered the question in the affirmative. The Commissioner of Income-tax has appealed to this Court with a certificate