R. DALMIA versus COMMISSIONER OF INCOME-TAX, NEW DELHI

Citation: [1977] 2 S.C.R. 654 · Decided: 19-01-1977 · Supreme Court of India · Bench: R.S. SARKARIA · Disposal: Dismissed

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Judgment (excerpt)

A 
D 
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fH 
654 
R. DALMIA 
v. 
COMMISSIONER OF INCOME-TAX, NEW DELHI 
January 19, 1977 
[R. S. SARKARIA AND P. S. KAILASAM, JJ.J 
Indian Income Tax Act (XI of 1922)-s. 2(6C) (iii)-Scope of-"Person 
concerned in the management of b11siness"-Meanin11 of. 
Words and plzrases-"concerned", "manage", meaning of. 
Section 2(6C) (iii) of the Income-tax Act, 1922 provides that the value of 
any benefit or perquisite, whether convertible into money or not, obtained from 
a company either by a director or by any other person who has a substantial 
interest in .the company (that is to. say, who .is concerned in the management 
of the busmess of the company, bemg beneficial owner of shares, 
not being 
shares entitled to fixed rate of dividend carrying not less than 20% 
of !he 
voting power) and any sum paid by any such company in respect of anv obli-
gation which, but for such appointment, w011ld have been 
payable 
by 
the 
director or other person aforesaid is income 
.. 
The assessee was the beneficial owner of 1800 out of 3000 equiiy shares of 
a company. 
He was, however, not its director. 
He had a similar int<:rest in 
another company. 
Both the companies had spent on his personal necessities a 
large sum of money, which the Income-tax Officer treated as his income under 
s. 2(6C) (iii) of the Act. 
The Appellate Assistant Commissioner, as also the 
Tribunal, dismissed his appeal against the order of the Income-tax Officer and 
the High Court answered the reference against the assessee. 
. 
' 
In appeal to this Court it was contended that ·the expression "concerned" in 
the management of the business of the company takes in only the person wh• 
legally participates in the management of its business and not one 
who has 
only remote control of its business, even if he had the 
majority of voting 
power. 
Dismissing the appeal, 
HELD : The expression "person concerned in the management of business" 
may take in not only a person who directly participates or engages 
in 
the 
management of the business but also one who indirectly controls its 
manage-
ment through the managerial staff from behind the scenes. 
[657 BJ 
1. (a) The term "concerned" in s. 2(6C)(iii) cannot be restricted to a per· 
son who is an employee of the business OL,an office-holder of the 
company. 
In the context of "management" it is wide enough to include 
every person 
"ifllerested" in the management, in the sense of having the direction and con-
trol of the managerial staff. [659 C-D] 
(b) The word "concerned" is not a term of art, having a precise and fixed 
meaning. It has several nuances, and is used to convey 
diverse 
shades 
of 
meaning. It may mean "to have a relation to. or bearing on, be of interest or 
importance" or ''to have an anxiety, worry''. 
"Concerned" as an adjective may 
n1ean "interested", "involved". 
In one context, it may mean one thing and in 
a different context another. [658 G-HJ 
(c) The word "concerned" takes its colour from the words "in the manage-
ment of the business" in associatiop with which it occurs. 
Jn the context of 
business, "manage" means "to control, to guide, to administer to conduct or 
direct affairs', carry on 'business. "Management" includes the act of manage-
ing by direction or regulation or administration or control or superintendence. 
[658 H, 659 A] 
R. DALMIA. v. COMM. OF I.T. (Sarkaria, J.) 
655 
(2) The .fast part of the clause is. confined to the obtaini_ng of the value of 
any benefit or perquisite from a company by a director, eveJ! if he has no subs- · 
·. tantial interest in the· company. The second part applies to a person who may 
riot be a director but has a substantial interest iri the company. What is ."subs-
. tantial interest'' is further equated by the succeeding expression "that is· to say" 
with the co-existence of two elements, namely, (i) concern in the management 
of the business of the company and (ii) beneficial ownership of shares (not 
being shares entitled to a fixed rate of dividend) carrying not less than 20% of 
the voting power. [657 G-HJ 
In the instant case, the ass,,ssee. obtained the benefit from the company hold-
ing 1800 out of 3000 shares, that is, carrying a voting power of 60% 
and, 
therefore, satisfied the second element. His own admission that he 
was 
in 
A 
B 
a 
control of the company necessarily includes an admission of his 
being "con-
~erned in the management of the business of the company". [658 A-BJ 
'-
CIVIL APPELLATE. JURISDICTION: Civil 

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