COMMISSIONER OF INCOME-TAX, NEW DELHI (NOW RAJASTHAN) versus EAST WEST IMPORT & EXPORT (P).LTD.,(NOW KNOWN AS ASIAN DISTRIBUTORS LTD), JAIPUR

Citation: [1989] 1 S.C.R. 570 · Decided: 08-02-1989 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
COMMISSIONER OF INCOME-TAX, NEW DELHI 
(NOW RAJASTHAN) 
v. 
EAST WEST IMPORT & EXPORT (P).LTD., 
(NOW KNOWN AS ASIAN DISTRIBUTORS LTD), JAIPUR.· 
FEBRUARY 8, 1989 
[R.S. PATHAK, CJ AND RANGANATH MISRA, J.] 
> 
Income Tax Act, 
1922: Section 23A (I) & Explanation-
--'.~ 
Requirement "If any such shares have been in the course of such 
C previous years"-"Are in fact freely transferable by the holders to the 
other members of public"-"In the course of such previous year"-
lnterpretation of-Whether means 'throughout the year' or 'any part of 
~ 
it'. 
Statutory Interpretation: Situation differently expressed by the 
D Legislature-Indication that Legislature intended to express different 
intention. 
E 
F 
Words and Phrases: 'In the course of such previous year'-
Meaning of 
Under articles 4, 81 and 82 of the Articles of Association of the 
respondent assessee company there was restriction on the transfer of 
the shares of the company by the shareholders to the other members of 
the public. These articles were deleted at an extraordinary general 
meeting of the Company held on 26th March, 1951 and consequently 
the shares of the Company acquired free transferability. For the~ * 
accounting year ending 31st March, 1951 the assessee company claimed 
;-
tax benefit u/s 23A(l) on the ground that by reason of the fact that its 
shares had acquired free transferability 'in the course of the previous 
year' the company had become 'a company in which public are substan-
tially interested'. 
· 
G 
The Iocome Tax Officer rejected the claim of the assessee com-
pany by holding that while Explanation to Section 23A(l) requires that 
the shares should have been freely transferable by the shareholders to 
the other members of the public at every point of time during the 
previous year and transferability should be established by actual trans-
fer; 'the Company satisfied the requirement only for four or five days of 
H 
the previous year. 
570 
COMMR. OF INCOME TAX v. EAST WEST IMPORT & EXPORT 571 
On appeal the Appellate Assistant Commissioner affirmed the 
view taken by the Income Tax Officer. The assessee company appealed 
to the Tribunal against the decisfon of the Appellate Assistant Commis-
sioner. The Tribunal accepted the contention of the assessee and 
allowed the appeal. 
A reference under Section 66(1) of the Income Tax Act, 1922 was 
made to the High Court at thdnstance of the Revenue which approved 
the view taken by the Appellate Tribunal, and held that the conditions 
required hy the Explanation to Section 23A(l) were satisfied and the 
benefit thereunder was availahie to the assessee company. 
In the appeal by Special leave by the Revenue to this Court on the 
question: whether the assessee had satisfied the requirements of the 
Explanation to Section 23A(l) of the Act, and was entitled to the tax 
benefit claimed. 
Allowing the appeal and setting aside the order of the High Court, 
HELD: 1. The Tribunal and the High Court went wrong in hold-
ing that the conditions required by the Explanation to Section- 23A(J) 
were satisfied and the benefit under the said section was available to the 
A 
B 
c 
D 
~ 
assessee. [575FI 
\ 
2. The assessee company could not be held to be a company in 
E 
which the public were substantially interested within the meaning of the 
Explanation to Section 23A(l) by reason of the fact that for a large part 
of the previous year the shares were not freely transferable, though they 
were so transferable at the end of the previous year. [574G I 
.. &.. 
~\ · 
3. The word 'Course' ordinarily conveys the meaning of a con-
F 
· tinuous progressfrom one point to the next in time or space and conveys 
the idea of a period of time; duration and not a fixed point of time. The 
expression 'in the course of such previous year' would refer to the 
period commencing with the beginning of the previous year, and 
terminating with the end of the previous year. Therefore, it would 
necessarily mean that free transferability of the shares by the holders to 
G 
other members of the public should be present throughout the previous 
_._., 
ye,ar. This was not the position in the in-slant case, as the transferability 
was acquired only on the 26th of March, 1951. [5750-FJ 
4. The Explanation to Section 23A(l) has reference to the point of 
time at two places: the first one has been stated as 'at the end of the 
H 
572 
SUPREME COURT REPORTS 
[1989] 1 S.C.R. 
A previous year' and the second is 'in the course of s

Excerpt shown. Read the full judgment & AI analysis in Lexace.