Try to use an absolute path to your image resource, for example by using one of the path helper functions. The following code works well with Laravel 4.1 and Intervention on fortrabbit:
Route::get('image', function()
{
$img = Image::make(public_path().'/files/image.jpg');
$img->flip('h');
return '<img src="data:image/jpeg;base64,'.base64_encode($img).'">';
});