1977 (1) TMI 1 - SC - Income Tax

Expression person concerned in the management of the business for the purposes of s. 2(6C)(iii) includes a person who indirectly controls management of the company - term concerned in this section could not be restricted to mean to be a person who was an employee or an office-bearer of the company - since the assessee was in control of the company he was a person concerned in the management of the business of the company

Summary

Issues:
1. Interpretation of section 2(6C)(iii) of the Indian Income-tax Act, 1922 regarding the definition of "concerned in the management of the business of the company."
2. Whether the benefit received by the assessee from two companies constitutes income under the said provision.

Analysis:

The Supreme Court judgment involved interpreting section 2(6C)(iii) of the Indian Income-tax Act, 1922, regarding the definition of "concerned in the management of the business of the company." The case revolved around the appellant, an individual, who received benefits from two companies without being a director of either. The Income-tax Officer treated the total benefit received by the appellant as income under the said provision. The Appellate Assistant Commissioner upheld this decision, finding the appellant to be the beneficial owner of shares carrying more than 20% of the voting power in one company and having 100% shareholding control in the other. The Income-tax Appellate Tribunal further held that the appellant was "concerned in the management" of one company due to his substantial shareholding. The appellant appealed to the Supreme Court challenging the interpretation of this provision.

The main contention raised was whether the appellant, despite not holding a position or office in the companies, could be considered "concerned in the management" merely by virtue of shareholding. The appellant argued for a restricted interpretation of the term "concerned," citing a decision from the Madras High Court and dictionary definitions. However, the Tribunal and the High Court found that the appellant's control over the companies established his involvement in the management, even without holding an official position. The Supreme Court agreed with this interpretation, emphasizing that the term "concerned" should be construed broadly in the context of business management, encompassing those with control over managerial staff.

The Court analyzed the provisions of section 2(6C)(iii) and concluded that the appellant's control over the companies demonstrated his active involvement in the management, satisfying the criteria set out in the law. The judgment affirmed the High Court's decision against the appellant, dismissing the appeal and upholding the tax liability on the benefits received. The Court's ruling clarified that the term "concerned in the management" should not be narrowly interpreted to exclude individuals like the appellant, who exert control over a company's affairs without holding a formal management position.