R.K. Gulati, J. - (1.) THIS reference relates to the assessment year 1959-60 with the relevant previous year ending on March 31, 1958.
(2.) M/s. Jaswant Sugar Mills Ltd., Meerut (hereinafter referred to as "the respondent"), is a limited company. The Income-tax Officer passed an order under Section 23A of the Indian Income-tax Act, 1922 (hereinafter called as "the Act"), on the ground that the assessee was not a company in which the public were substantially interested. It ought to have distributed out of its profits for this year Rs. 4,80,990 being 45% of the distributable income. As against this, it distributed only Rs. 3,55,000. There was thus a deficit of Rs. 1,25,990 for which the assessee had no satisfactory explanation. Accordingly, he levied additional super-tax of Rs. 2,64,130 The assessee was aggrieved and appealed to the Appellate Assistant Commissioner but the Appellate Assistant Commissioner did not accept the assessee's contention that the Income-tax Officer wrongly invoked Section 23A of the Act. He, therefore, confirmed the assessment on the legal issue but allowed some relief on the quantum of tax and the income liable to tax under Section 23A of the Act. In the second appeal filed before the Income-tax Appellate Tribunal under Section 33 of the Act, the first objection pressed before it was that the assessee was a company in which the public were substantially interested in the year in dispute for the reasons : (i) it was a public limited company ; (ii) its shares were freely transferable by the shareholders to the other members of the public and the shares have been the subject-matter of dealing in the Delhi Stock Exchange ; (iii) the finding of the Appellate Assistant Commissioner to the effect that less than 6 persons controlled the affairs of the company was erroneous and its shareholding carrying more than 50% of the voting power at no time during the previous year were held by less than six persons.
(3.) THE Department, however, contested the matter, inter alia, on the grounds that: (a) Bulk of the shares of the assessee were held by one group, namely, Seth Banarsi Das Gupta and his sons, etc., and out of two lakhs ordinary shares of the company, the Hindu undivided family of Banarsidas held 1,66,720 ordinary shares. (b) THE number of persons controlling the affairs of the company was five only and, therefore, less than the requisite number of six. A chart which is set out below was filed by the assessee before the Income-Appellate Tribunal showing the shareholding as on May 31, 1958, by the directors, their relatives, etc.: JUDGEMENT_591_ITR167_1987Html1.htm It was not disputed that Seth Mohan Lal, son of Banarsi Das Gupta, and Seth Mohan Lal and Sons form one group with Banarsi Das Gupta between themselves but according to the respondent-company, their combined shares came to only 93,270 holding which carried less than 50% of the voting power and the balance share out of the holding of Rs. 1,66,720 were held under blank transfers and, therefore, carried no voting power and as such were to be left out while computing the number of vote-carrying shares.;