1960 (12) TMI 10

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... hree Changdeo Sugar Mills Ltd. to which section 23A of the Income-tax Act (prior to its amendment by the Finance Act, 1955) was applied in respect of the assessment year 1948-49. The question which was referred to the High Court was whether at the relevant time the assessee company could be deemed to be a company in which the public were substantially interested. This question was answered in the negative by the High Court. During the assessment year the company had not distributed dividends to the extent of 60 per cent. of its profits and an order under section 23A(1) of the Indian Income-tax Act was passed by the Income-tax Officer. The company appealed to the Appellate Assistant Commissioner, who dismissed the appeal. It next appealed .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ssee company. If these shares could be said to be held by the public along with 4,320 shares, the public would be holding 25 per cent. of the voting power, whether or not the directors of the company held the rest of the shares. It was, therefore, necessary for the High Court to consider whether the shares held by Mysore Merchants Ltd. could be said to be held by the public. The High Court held against the assessee company that they could not be counted as part of the holding by the public and, in our judgment, the High Court has reached the correct conclusion. The matter has to be judged under the third proviso to section 23A(1), which read as follows : " Provided further that this sub-section shall not apply to any company in which .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... that company ; (b) It must have assessable profits for the relevant assessment year ; and (c) It must not have distributed 60 per cent. of its net assessable profits. He contends that unless these three conditions are fulfilled, section 23A will not apply to Mysore Merchants Ltd. and that the shares held by it will be deemed to be held by the public. He points out that Mysore Merchants Ltd. had no assessable income in the corresponding assessment year and had suffered a loss, that conditions (b) and (c) did not, therefore, apply and that section 23A is not applicable to that company. In our opinion, the paramount condition is that even in that company the public should be beneficially interested in 25 per cent. of the voting power .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X