COMMISSIONER OF INCOME TAX Vs. THREESIAMMA ABRAHAM NO 2

JUDGEMENT

(1.) In I. T. R. Nos. 6 to 11 of 1994 relating to assessment years 1976-77 to 1981-82, the common questions referred by the Income Tax Appellate Tribunal, Cochin Bench, at the instance of the Revenue are as follows:

(2.) The matter arose under the Wealth Tax Act, 1957. Assessee is common in all the reference cases. She is a shareholder in National Tyre and Rubber Company of India Ltd., hereinafter referred to as 'the company'. She was having substantial interest in the Company as more than 20 per cent of the shares of the company were held by her close relatives. The company was running on loss and when the factory was destroyed by fire, it went on voluntary liquidation on 27th July 1965. In the Sight of a policy announced by the Central Government for revival and reconstruction of industrial undertakings which were discontinued because of extensive damage or destruction to its building, machinery, etc., as a result of natural calamities, the contributories of the company met on 10th July 1967 and decided to revive the company utilising an amount of Rs. 6 lakhs by way of loan from Kerala Financial Corporation, a Government undertaking. A compromise or arrangement for reconstruction of the company was thereupon proposed between the company and members and creditors and as per orders passed by this Court on 20th December 1967, the liquidator of the company convened separate meetings of the shareholders, secured creditors and unsecured creditors to consider the compromise or arrangement. Meetings were held on 27th February 1968 and the compromise or arrangement was approved with certain modification and by order dated 2nd April 1968, this Court sanctioned the scheme subject to the terms and conditions in the said order. This Court also granted sanction by order dated 13th March 1969 for execution of the mortage. Assessee was one of the parties to the compromise or arrangement.

(3.) The company thereupon applied for a loan of Rs. 20 lakhs for its reconstruction. Loan was sanctioned by the Kerala Financial Corporation against the mortgage of the properties belonging to the company and properties belonging to the guarantors, namely, the assessee and some other share holders. Mortgage is evidenced by an Indenture dated 22nd September 1969 between the company, Sri P. C. Abraham, the assessee along with some other shareholders and the Kerala Financial Corporation.