1960 (12) TMI 10

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..... 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 to the Tribunal, but was unsuccessful. The Tribunal, however, referred the above question which, as already stated, was answered in the negative by the High Court. The issued, subscribed and paid-up capital of the assessee company consisted of 60,000 shares, which were distributed as follows : (1) Eleven directo .....

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..... ants 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 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 substan .....

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..... 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 and it was admitted before us that it was not a public company at all but a private company and that, therefore, the public were not interested in that company. The shares held by Mysore Merchants Ltd. cannot at all be counted as a holding in which the public are beneficially interested, in view of the exclusion contained in the Expl .....

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