CHANDURKAR,J. - (1.) THE question which has been referred to us in this reference is as follows : "Whether, on the facts and in the circumstances of the case, the order of the ITO under S. 23A of the Indian IT Act, 1922, and the corresponding S. 104 of the IT Act, 1961, for the asst. yrs. 1960 61 to 1962 63 was valid in law?"
(2.) THE assessment years in question are 1960 61, 1961 62 and 1962 63. The shareholding of the several shareholders of the assessee company have been found to be as follows : The ITO having come to a finding, into the details of which we do not think it necessary to go, that the assessee company was a company in which the public were not substantially interested, levied penal super tax at the rate of 50per cent of the distributable profit for each of the assessment years under consideration. In appeal, the AAC cancelled the penal super tax for all the years, though he passed separate orders, one in respect of the asst. year 1960 61 and a consolidated order for the asst. yrs. 1961 62 and 1962 63. The AAC held on examination of the list of shareholders that 50per cent of the shareholding was held by three companies, namely, M/s Assam Jute Supply Co. Ltd., M/s Gwalior Webbing Co. Ltd. and M/s Punjab Produce & Trading Co. Ltd. He further held that to these three companies, the provisions of S. 23A were not applicable. He had relied upon a decision of the AAC, B Range, Calcutta, in Appeals Nos. 535, 534 and 523 of 1965 66, in which M/s Gwalior Webbing Co. Ltd. was held to be a public limited company.
(3.) WHEN the matter was taken to the Tribunal by the ITO who appealed against the order of the AAC, the Tribunal held that no material had been brought on record by the Revenue that the shareholders of the assessee company were closely related or they acquired the shares of the assessee company with a common object. Examining the constitutions of M/s Assam Jute Supply Co. Ltd. and M/s Gwalior Webbing Co. Ltd., the Tribunal held that those companies were not interconnected and the shares were held by the public. The Tribunal came to the conclusion that since the shares of the assessee company were held by the public and the affairs of the company were under the control of more than six persons, it considered it unnecessary to advert to the provisions of the Companies Act. The Tribunal having dismissed the appeals filed by the Revenue, the question reproduced earlier has been referred to us at the instance of the Revenue.;