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The plaintiff (Mrs Guzdar) received certain amounts as dividend in respect of shares held by her in a tea company. Under the Indian Income-tax Act, agricultural income is exempted from payment of income-tax. As income of a tea company is partly
agricultural, only 40 per cent of the company’s income is treated as income from manufacture and sale, and therefore, liable to tax. The plaintiff claimed that the dividend income in her hands should be treated as agricultural income up to 60 per
cent, as in the case tea company, on the ground that dividends received by shareholders represented the income of the company.
It was held that: Though the income in the hands of the company was partly agricultural yet the same income when received by Mrs. Guzdar as dividend could not be regarded as agricultural income.
A very popular case…