TMI Blog1973 (1) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court whereby it answered the following question in the affirmative and in favour of the revenue : " Whether, in the facts and circumstances of the case, the provisions of section 23A were rightly invoked ? " The matter relates to assessment years 1952-53 and 1953-54. It would, however, be convenient to set out the facts relating to the year 1952-53 because the decision in regard to the assessment for that year would also govern the assessment for the following year. The assessee-appellant is a limited company. Proceedings under section 23A of the Indian Income-tax Act, 1922 (hereinafter referred to as " the Act "), were started against the appellant-company as it had not declared any dividend during the year. The Income-tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange. After deducting Rs. 8,40,524 on account of tax payable on Rs. 22,65,227, the balance of Rs. 14,23,703 was deemed by the Income-tax Officer to have been distributed amongst the shareholders. On appeal before the Appellate Assistant Commissioner, it was urged on behalf of the assessee-company that JC Mills and PPI Co. were companies in which the public was substantially interested and, as such, the shareholding of these public companies should be considered to be shares held by the members of the public. The Appellate Assistant Commissioner did not go into the question as to whether or not the above-mentioned two companies were such in which the public was substantially interested. He observed that groups of the two companies were c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he shares were not in fact freely transferable. The Tribunal consequently upheld the assessee's contention that it was a public limited company in which the public was substantially interested and its shares were freely transferable. The provisions of section 23A of the Act were held to have been wrongly invoked. The order of the Income-tax Officer in this respect was consequently set aside. The question reproduced above was thereafter referred to the High Court. The High Court by a short order answered the question in the affirmative and in this connection relied upon an earlier decision of the Calcutta High Court in Commissioner of tax v. Tona Jute Co. Ltd. In appeal before us, Mr. Sen on behalf of the appellant has contended that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectors had been exercising their power under article 37 freely and had virtually eliminated the element of free transferability of the shares in the company, the mere existence of an article like article 37 could not be said to affect the free transferability of the shares as contemplated by the Explanation to section 23A of the Act. There is in the present case also no evidence to show that the directors had eliminated the element of transferability of shares. As such, we find that the decision of the High Court in answering the question against the assessee cannot be sustained. On an earlier date of hearing Mr. Ahuja, on behalf of the revenue, prayed for adjournment to ascertain whether there was any cogent material on the record to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the resume of facts, more than 75 per cent. of the shares of the assessee-company are held not by a group of partners but by two public companies in which the public are substantially interested. There is also no material to show that any group acting in concert is in control of the assessee-company. As such, the case of Jubilee Mills cannot be said to have any material bearing. We, accordingly, accept the appeals, set aside the judgment of the High Court and discharge the answer given by it to the question referred to it. We answer the said question in the negative and in favour of the assessee. The assessee-appellant shall also be entitled to the costs of this court and the High Court. One set of hearing fee. Appeals allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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