S. R. Das, J. - (1.) This appeal by special leave arises out of a consolidated reference made on the 19th April, 1949 under Section 66(1) of the Indian Income-tax Act read with Section 21 of the Excess Profits Tax Act by the Income-tax Appellate Tribunal, Madras Bench. The reference arose out of four several proceedings for assessment to Excess Profits Tax of the appellant, the chargeable accounting periods being periods ending with 31st March of each of the years 1942, 1943, 1944 and 1945.
(2.) The relevant facts appearing from the consolidated statement of the case are as follows: Narain Swadeshi Weaving Mills, the appellant before us (hereinafter referred to as the assessee firm), is a firm constituted in 1935 upon terms and conditions set forth in a deed of partnership dated the 6th November 1935. The partners were Narain Singh and two of his sons, Ram Singh and Gurdayal Singh, their respective shares in the partnership being 6 annas, 5 annas and 5 annas. The business of the firm which was carried on at Chheharta, Amritsar, in the Punjab, was the manufacture of ribbons and laces and for this purpose it owned buildings, plant, machinery, etc.
(3.) On the 7th April 1940 a public limited liability company was incorporated under the name of Hindustan Embroidery Mills Ltd. The objects for which the company was established were to purcahse, acquire and take over from the assesee firm the buildings and leasehold rights, plant, machinery, etc., on terms and conditions mentioned in a draft agreement and the other objects set forth in the Memorandum of Association of the said company. Out of the total subscribed capital represented by 41,000 shares, 23,000 Shares were allotted to the assessee firm. Of these 23,000 shares so allotted 20,000 shares were not paid for in cash but the remaining 3,000 shares were paid for in cash. The directors of the company were Narain Singh and his three sons Ram Singh, Gurdayal Singh and Dr. Surmukh Singh and one N. D. Nanda, a brother-in-law of Gurdayal Singh, Dr. Surmukh Singh was at all material times residing in South Africa. These 4 directors between themselves hold 33,340 shares including the said 23,000 shares. The company was accordingly, a director controlled company.;