Judgment

KHANNA, J.:- This appeal on certificate has been filed by the Commissioner of Income-tax against the judgment of Madras High Court whereby that court answered the following question referred to it under Section 66 (1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act) in the negative in favour of the assessee respondent:

"Whether on the facts and circumstances of the case, the Tribunal was right in holding that the sum of Rs. 95,944/- is liable to tax under Section 12B (2)?"

2. The matter relates to assessment year 1961-62. The assessee is a public limited company carrying on the business of manufacture and sale of yarn. The assessee held shares in the following companies as under:

1) Indian Mills Supply Company (Private) Limited, 2,760 shares of the face value of Rs. 100/-

2) Harveys (Private) Limited, 1,000 shares of the face value of Rs. 100/-

3) Pandyan Weaving Mills (Private) Limited, 1,800 shares of the face value of Rupees 100/-.

The above three companies went into voluntary liquidation in December, 1959. In the course of the liquidation proceedings, the liquidators made distribution in the relevant year of account and the assessee company got cash or