FIRST INCOME-TAX OFFICER, SALEM vs M/S. SHORT BROTHERS (P) Ltd.

The Supreme Court held that under Section 2(6-A) and Section 12 of the Income-tax Act, 1922, accumulated profits distributed during liquidation are considered dividends for tax purposes. The Court affirmed the High Court's decision that the Income-tax Officer could not treat the distribution of Rs. 850,000 as dividends without determining if it included capital gains from agricultural assets. The ruling clarified that profits earned before liquidation, if distributed, are taxable as dividends, regardless of the timing of their realization.