9911796707
TMI Blog1970 (4) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (hereinafter called "the assessee") is a company limited by shares. In the general meetings of the shareholders for the respective accounting years no dividends were declared, although sufficient profits were available for distribution. It was urged before the Income-tax Officer that it was a company in which "the public were substantially interested" within the meaning of the third proviso to section 23A(1) of the Income-tax Act, 1922, read with the Explanation thereto, and, therefore, the provisions of sub-section (1) of section 23A were not attracted. The Income-tax Officer came to the conclusion, firstly, that 75 per cent. of the shares and voting power of the company were held by persons who could not be regarded as belonging to "th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the shareholding of the beneficial owners remained unaltered. This indicated that there was an absence of any dealing in shares by the beneficial owners. The Tribunal also found that the assessee did not satisfy the other condition regarding the free transferability of its shares as article 13 of the articles of association of the assessee laid down that the directors may refuse to register any transfer of a share and may also "veto any transfer without assigning any reason". The Tribunal accordingly refused to give, any relief to the assessee and dismissed the appeals. At the instance of the assessee the Appellate Tribunal stated a case to the High Court on the following question of law under section 66(1) of the Act : " Whether, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ends amongst the shareholders as at the date of the general meeting aforesaid, and thereupon the proportionate share thereof of each shareholder shall be included in the total income of such shareholder for the purpose of assessing his total income : .... Provided further that this sub-section shall not apply to any company in which the public are substantially interested or to a subsidiary company of such a company if the whole of the share capital of such subsidiary company is held by the parent company or by the nominees thereof. Explanation.--For the purpose of this sub-section,-- a company shall be deemed to be a company in which the public are substantially interested if shares of the company (not being shares entitled to a fixe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the shares. In support of this contention reliance was placed on a decision of the Madras High Court in East India Corporation Ltd. v. Commissioner of Income-tax in which it was held that the mere fact that an absolute discretion was vested in the board of directors to refuse to register the transfer of shares in a given case could not by itself lead to the inference that the shares were not in fact freely transferable. The opposite view-point was put forward on behalf of the respondent. Reference was made in this connection to the decision of the Calcutta High Court in Commissioner of Income-tax v. Tona Jute Co. Ltd., in which it was held that a public company whose directors had an absolute discretion to refuse to register the transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cutta Stock Exchange represents the actual transactions which have already taken place, (3) whether there was any fluctuation in the price of shares, and (4) the number of quotations in the two years of account. We, accordingly, direct the Income-tax Appellate Tribunal to furnish a supplementary statement of the case under section 66(4) of the Act on the points mentioned above. In submitting its supplementary statement the Tribunal will not travel outside the record of the case before it. These appeals will be placed for hearing after the supplementary statement is received. S. Ray, Senior Advocate (O. P. Khaitan and B. P. Maheshwari, Advocates, with him), for the appellant. Jagadish Swarup, Solicitor-General of India (R. N. Sachthey an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is common ground that condition (1) is satisfied in this case in respect of condition (2), there was controversy and this court by order dated February 11, 1969, directed the Income-tax Appellate Tribunal to submit a supplementary statement of case on the following four points : (i) whether the shares were quoted in the Calcutta Stock Exchange in the "cash section" or the "forward section" ; (ii) whether the heading of the bulletin of the Calcutta Stock Exchange represents the actual transactions which have already taken place ; (iii) whether there was any fluctuation in the price of the shares ; and (iv) the number of quotations in the two years of account. The Tribunal has submitted a statement of case (1) that the shares ..... X X X X Extracts X X X X X X X X Extracts X X X X
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