TMI Blog1981 (8) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961, and so the assessee was hit by section 13(2). He also found that the assessee had invested in the shares of a company, styled Laxmi Starcy Ltd., to an extent which exceeded 5 per cent of the capital of the said company and that the said company was one to which section 13(2)(h) read with Explanation 3 applied. Hence, he held that the assessee was also hit by section 13(2)(h) and not saved even by section 13(4). Hence, he denied the exemption under section 11 and subjected the entire income of the assessee to tax. 3. For the assessment year 1974-75 (previous year ended 31-12-1973) there was no loan to Das Co. but the funds of the assessee continued to remain invested in the shares of Laxmi Starch Ltd. For the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company and so section 13(4) did not apply. Shri Dilip Dwarkadas replied that the investments of the assessee in the company did not exceed 5 per cent of the equity capital of the company in the second year as it was only Rs. 1,98,100. 7. We have considered the contentions of both the parties as well as the facts on record. So far as the first year is concerned, we find that the assessee is squarely hit by section 13(2)(a). Personal security is no security in the eye of law because in the event of the dissolution of the firm the debt due to the assessee can only be regarded as unsecured. This debt has admittedly not been secured against any of the assets of the firm. Hence, the assessee loses exemption on all its income under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erated in section 13(3) and if such total exceeds 20 per cent, then section 13(2)(h) should be applicable. We have considered this contention but we do not agree. "Substantial interest" has been defined in Explanation 3. A plain reading of this section shows that it clearly refers only to the holdings of the persons enumerated in section 13(3) and not to those of the assessee itself. Section 13(3) does not include the assessee itself. Hence, we do not find any force in this contention raised for the revenue. Thus, we hold that for the assessment year 1974-75, the assessee is not hit by section 13(2)(h) and so the exemption under section 11 was erroneously denied to it. We, reverse the decision of the lower authorities and direct that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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