JUDGMENT Dixit, C.J. 1. This reference under section 66 (1) of the Indian Income-tax Act, 1922, has been made by the Income-tax Appellate Tribunal Delhi, at the instance of the assessee, Ujjain General Trading Society (P) Ltd. Gwalior. The question which has been referred to us for decision is :- "Whether, on the facts and in the circumstances of the case, the devidend income of the assessee company should be taken to be- (1) The value of the shares received as devidend as fixed in the resolution declaring the devidend, or (2) The market value of the shares on the date of declaration of dividend, or (3) The market value of the share on the date on which the dividend was actually received by the asseisee company.?" 2. The Pilani Investment Corporation Ltd. (hereinafter referred to as the Pilani Company) passed a resolution at its General Meeting held on 18th November 1958 declaring dividend on its shares in the following terms:- "RESOLVED that the dividend on 35,15,000 ordinary shares of the company for the year ended 31st March, 1958 as proposed by the directors be and the same is hereby approved and made payable to those share-holders whose names stand on the register of members on the 19th day of November 1958, 00.40 NP. per share (free of income-tax) in the shape of: One ordinary share of Gwalior Rayon Silk Mfg. (Wvg). Co. Ltd. for every 35 shares of the company at the rate of Rs.10/- each. PLUS One Ordinary share of Hind Cycles Ltd. for every 1100 shares of the company at the rate of Rs.125/- each. PLUS Balance in cash. Further resolved that all the shares of the above-noted companies will be distributed in complete unit and fractions if any will be paid in cash. The share-holders will also have the option of taking cash instead of shares." The assessee company as holder of 2,78,711 ordinary shares of the face value of Rs.10/-each became entitled to receive Rs.1,11,484-40 as dividend in cash or the equivalent number of shares of the Gwalior Rayon and Silk fg. (Wvg.) Co. Ltd. and Hind Cycle Ltd. Plus cash for the balance. It however, received on 2nd January 1959 as dividend 7963 shares of the Gwalior Rayon and Silk Mfg. (Wvg.) Co. Ltd., 253 fully paid ordinary shares of the Hind Cycles Ltd., and Rs.299.40 in cash. (Wvg.) Co. Ltd. and Hind Cycle Ltd. Plus cash for the balance. It however, received on 2nd January 1959 as dividend 7963 shares of the Gwalior Rayon and Silk Mfg. (Wvg.) Co. Ltd., 253 fully paid ordinary shares of the Hind Cycles Ltd., and Rs.299.40 in cash. The valuation of the shares of the Gwalior Rayon and of the Hind Cycles Ltd. was made at the rate mentioned in the resolution dated 18th November 1958. It was common ground that on the date of declaration of the dividend the market value of one ordinary share of the Gwalior Rayon was Rs.14.60 and the market value of one ordinary share of the Hind Cycles Ltd. was Rs.128.50. The Pilani Company had acquired the shares it distributed as dividend paying Rs.10/- per share for the Gwalior Rayon and Rs.125/- per share for the Hind Cycles Ltd. The resolution dated 18th November 1958 no doubt gave an option to the share-holders of the Pilani Company to receive the dividend either in cash or in specie; but it is an admitted position that before dispatching the dividend warrants for shares and/or cash, the Pilani Company never ascertained from the share-holders the way in which they preferred to exercise the option. 3. In its return of income for the assessment year 1959-60, the assessee company showed Rs.1,11,484.40 as its income from dividend on its shares in the Pilani Company. The assessee valued the shares of the Gwaliar Rayon and the Hind Cycles Ltd. as Rs.10/- and Rs.125/-per share respectively as per the resolution dated 18th November 1958 of the Pilani Company declaring dividend. The Income-tax Officer, Gwalior however took the view that the asoessee's income from dividend from its shares in the Pilani Company should be calculated taking the market value of the shares of the Gwalior Rayon and the Hind Cycles Ltd. on the date of the declaration of the dividend. On this calculation, the Income-tax Officer added a sum of Rs.37.515/- to the dividend income declared by the assessee company on its holdings in the Pilani Company. The decision of the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. 4. On this calculation, the Income-tax Officer added a sum of Rs.37.515/- to the dividend income declared by the assessee company on its holdings in the Pilani Company. The decision of the Income-tax Officer was confirmed in appeal by the Appellate Assistant Commissioner and by the Appellate Tribunal. 4. It will be seen that the question put forward before us proceeds on the undisputed basis that dividend need not be distributed in money or cash; it may be distributed by delivery of property or right having monetary value. In fact, before the Tribunal the position was admitted that dividend could be paid not only in money but "in money's worth also by delivery of goods or securities" and that the shares of the Gwalior Rayon and the Hind Cycles Ltd. received by the assessee company constituted its in. come as dividend on the shares held by the assessee company in the Pilani Company. This position was in accord with the decision of the Supreme Court in Kantilal Manilal and others Vs. Commissioner of Income-Tax [(1961) 41 ITR 275] where it has been held that "dividend need not be distributed in money it may be distributed by delivery of property or right having monetary value". The controversy in this reference centres round the question of the monetary value in the bands of the assessee of the shares of the Gwalior Rayon and the Hind Cycles Ltd. which it received as dividend. 5. In our opinion, by the resolution of 18th November 1958 the Pilani Company distributed by way of devidend out of its profits a part of its assets namely, the shares to which it was entitled in the Gwalior Rayon and the Hind Cycles Ltd. This distribution, which was both in form and substance a release by the Pilani Company of its assets to its shareholders, was clearly" dividend within the ordinary meaning of the word "dividend" namely, the receipt by the share-holder by reason of his being a shareholder a part of the profits of the Company of which be is a share-holder. The Supreme Court has pointed in Kantilal Manilal and others Vs. The Supreme Court has pointed in Kantilal Manilal and others Vs. Commissioner of Income Tax (supra) that the ordinary meaning of "dividend" is a distributive share of the profits or income of a company given to its share-holder" and when the Legislature by section 2 (6A) sought to define the expression "dividend" it added to the normal meaning of the expression several other categories of receipts which may not otherwise be included therein. The Supreme Court emphasized that by the definition given in section 2 (6A) 'dividend' meant dividend as normally understood and included in its connotation several other receipts set out in the definition. Profits mean "advantage or gain in money or in money's worth". If, therefore, there was a release to the share-holders by the Pilani Company of a part of its assets, namely, the shares to which it was entitled in the Gwalior Rayon and the Hind Cycles Ltd., by the resolution dated 18th November 1958 and the share-holders got an advantage by receiving as dividend shares in the Gwalior Rayon and the Hind Cycles Ltd; at the rate of Rs.10 and Rs.125 respectively when their market value on the date of the declaration of the dividend was higher then clearly the value of the shares Which the assessee received as dividend was their market value as assets of the Pilani Company and not the valuation which the Pilani Company put down in the resolution dated 18th November 1958 or in its books. The value of the shares in question to the Pilani Company was not the value which that Company set down in its resolution dated 18th November 1958 or in its books but the value which it would have obtained if it bad sold the shares in market on 18th November 1958, If the Pilani Company had thus sold the shares, it could have secured for itself not merely the par value of the shares entered in its books or the valuation put on the shares in the resolution dated 18th November 1958 but it would also have been able to obtain a premium. Instead of doing so, the Pilani Company diverted into the pockets of its share-holders the equivalent value of the shares of the Gwalior Rayon and the Hind Cycles Ltd., which it otherwise would have obtained on 18th November 1958. Instead of doing so, the Pilani Company diverted into the pockets of its share-holders the equivalent value of the shares of the Gwalior Rayon and the Hind Cycles Ltd., which it otherwise would have obtained on 18th November 1958. When, therefore, the shares in question were given to the assessee as dividend, the equivalent money value of the shares to the assessee was the value computed on the basis of the market price of the shares prevailing on 18th November 1958. 6. That the equivalent money value of the shares has to be determined with reference to .he market price of the shares prevailing on 18th November 1958 is clear from the fact that the dividend accrued to the assessee Company on the date it was declared, that is, on 18th November 1958; and it was on that date that the dividend declared became a debt owed by the Pilani Company to the assessee. The argument that in the hands of the assessee the value of the shares received as dividend would be as on the date the shares are transferred to the assessee and received by it is of no validity. It is quite true that after the declaration of dividend, shares given as dividend may rise or fall in market and until the shares given to a share-holder as dividend are transferred to him, he is not in a position to realise the equivalent value of the shares by selling them in open market. But by the resolution dated 18th November 1958 what the share-holders received as dividend in the form of shares were the shares of the Gwalior Rayon and the Hind Cycles Ltd. having that market price which was prevailing on 18th November 1958, and not the price which might have prevailed subsequently. It is, therefore, altogether fallacious to say that the equivalent money value of the shares which the assessee received should be computed on the basis of the market price prevailing on the day when it actually received the shares as dividend. 7. It is worthy of note that the resolution dated 18th November 1953 gave an option to the share-holders of taking dividend either in cash or in the form of shares. A share-holder exercising the option and deciding to take shares as dividend does so taking the risk of the shares which he may obtain as dividend rising or falling in value. A share-holder exercising the option and deciding to take shares as dividend does so taking the risk of the shares which he may obtain as dividend rising or falling in value. In the present case, it was not enquired of the assessee company whether it would like to have the dividend in the form of shares; but, at the same time, the assessee company accepted the shares given to it as dividend without any demur. It must, therefore, be taken that the assessee company, if not expressly, impliedly agreed to take the shares as dividend and along with it the risk of the shares falling or rising in value after the declaration of dividend on 13th November 1958. It is not necessary to speculate on the reasons which prevailed with the Pilani Company for not ascertaining from the assessee company about the exercise of option and for the acceptance of the shares by the assessee company without any demur. It is likely that the Pilani Company, the assessee Company, the Gwalior Rayon and the Hind Cycles Ltd., are all closely connected. For that reason, the Directors of the Pilani Company really intended to give the assessee company a chance of acquiring a share interest in the Gwalior Rayon and the Hind Cycles Ltd., at a favourable price so that it might have a "stake" in the Gwalior Rayon and the Hind Cycles Ltd., with the success of which the assessee company's Own interest may be closely connected. 8. Our attention has not been drawn to any authority directly covering the questions placed before us for decision in this reference. But some guidance is obtainable from the cases of Weight (H.M. Inspector of Taxes) Vs. Salmon [(1935) 19 T.C. 174] and Ede (H.M. Inspector of Taxes) Vs. Wilson) [(1945) 26 T.C. 381]. In both those cases, the employees of two companies were allowed to acquire at par value certain shares when the shares were of greater value. The employees there had to pay the sum required, which was charged at par value; and it was held in those cases that the employees were taxable on the difference as between the par value and the actual value of the shares. In other words, they were taxed on the value of that which they received. The employees there had to pay the sum required, which was charged at par value; and it was held in those cases that the employees were taxable on the difference as between the par value and the actual value of the shares. In other words, they were taxed on the value of that which they received. The principle that runs through these two cases can be legitimately applied here for holding that the assessee company is liable to be taxed on the shares receive ed by it as dividend not according to the value set down in the resolution dated 18th November 1958 but according to the actual market value of the shares. That market value, as pointed out earlier, would be as on 18th November 1958. 9. For all these reasons, we answer the question referred to us by saying that the dividend income of the assessee company would be the market value of the shares on the date of the declaration of the dividend. The assessee shall pay costs of this reference. Counsel's fee is fixed at Rs.200.