1. On an application filed under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as “the Act

of 1961”), the Tribunal has referred the following questions for our opinion: “1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding in law that the assessee was entitled to the benefit of the provisions contained in Section 54E of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the order of the Commissioner of Income-tax passed under Section 263 and in holding that the order passed by the Income-tax Officer was not erroneous and prejudicial to the interests of the Revenue ?“

2. The relevant facts of the case are that the assessee-company held 4,945 shares of Colaba Land and Mills Co. Ltd., since 1954. The company, Colaba Land and Mills Co. Ltd., went into liquidation and the assessee-company realised the face value of the shares in the assessment year 1978-79 and during the accounting year relevant to the assessment year under reference the official liquidator paid the assessee-company a sum of Rs. 1,98/000 representing the share of the