Grover, J. - (1.) This is an appeal by special leave from a judgment of the Calcutta High Court in an Income-tax reference.
(2.) The assessee is a limited company incorporated under the erstwhile Gwalior State Companies Act which did not make any distinction between a private company and a public company. The paid-up capital of the company was Rs. 25,00,000/- composed of 25,000 ordinary shares of Rs. 100/- each. These 25,000 ordinary shares were held by 17 shareholders in all. It was also common ground that the shares carrying more than 50% of the total voting power were held by less than 6 persons during the accounting period. The assessment year was 1955-56 the accounting year being the one ending on March 31, 1955. The total income assessed for the aforesaid year was Rs. 9,54,658/- on which tax payable amounted to Rs. 4,05,492. The surplus available for distribution of dividend was Rs. 5,49,166/-" No dividend, however, was distributed although at the meeting held on June 8, 1955 the accounts which were approved showed a net profit of Rs. 6,81,298/-.
(3.) The controversy before the Income-tax Officer centered on the applicability of the provisions of S. 23A of the Income-tax Act 1922. According to the assessee that section was not applicable but the Income-tax Officer came to the conclusion that since the shares carrying more than 50% of the total voting power were held by less than 6 persons the company was not one in which the public were substantially interested. As no justifiable reason for non-distribution of the requisite percentage of the dividend had been furnished S. 23A was applicable and 100% distribution was called for. In view of the provisions of S. 23A (1) additional super tax of Rs. 1,37,291.50 paise was imposed subsequent to the completion of the assessment.;