LexSHREE CHANGDEO SUGAR MILLS, LTD. versus THE COMMISSIONER OF INCOME TAX, BOMBAY
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l?a~huvanshi 1Wills, ttd. v. Co1n'1tissioner of Income-tat'", Bon1flay Hidayatullah J. December 7. 990 SUPREME COURT REPORTS [1961] case the provisions of s. 23A of the Indian Income-tax Act, XI of 1922, are applicable to t.he petitioners?" The High Court may call for a supplemental state- ment of the case from the Tribunal, if it finds it neces- sary. The appeal is allowed. the costs of this appeal. shall abide the result. The respondents shall bear The costs in the High Court Appeal allowed. SHREE CHANGDEO SUGAR MILLS, LTD. ti. THE COMMISSIONER OF INCOME TAX, BOMBAY (J. L. KAPUR, M. HIDAYATULLAH, and J. c. SHAH, JJ.) Income-tux-Undistributed income-Company in w/licl• Public' are substantially interested-Powers to assess Super Tax-Test- Part B States (Taxation Concession) Order, I9j0, cl. I4-lndian Income-tax Act, I922 (II of I922), s. 23A(I). During the assessment year, the company had not distri- buted dividends to the extent of 60% of its profits and an order under s. 23A(1) of the Act was passed by the Income-tax Officer. The question referred by the Tribunal to the High Court was whether at the relevant time the assessee company could be deemed to be a company in which the public were sub- stantially interested, i.e., held 25% of the voting power, was answered in the negative. Held, that the test that no holding by the Directors of a company could be regarded as one in which the public were sub- stantially interested was not the correct test to apply. The test as laid down in Raghuvanshi Mills v. Commissioner of Income-tax, [1961] 2 S.C.R. 978, would apply to this Case. Held, further, that the paramount condition in applying the proviso and the explanation of s. 23A(r) was that the public should be beneficially int.rested in 25% of the voting power. The explanation to s. 23A required that shares held by the company should be considered as held by the public, only if s. 23A did not apply to it. The concession order in cl. 14 of the Part B States \Taxation Concession) Order, 1950, did not seek to negative that test, it only conlerred a benefit on a company, > • 2 S.C.R. SUPREME COURT REPORTS 991 to which cl. 14 applied, and the company could avail that con- cession, and still might fall within s. 23A for other purposes. The Raghuvanshi Mills Ltd. v. Commissioner of Income-tax, Slwu Changdeo Bombay, [1961] 2 S.C.R. 978, applied. Sugar ~11/s, Ltd. CIVIL APPELLJ.TE JURISDICTION: Civil Appeal Commisstoner of No. 380 of 1957. r..com•-ta,,, Appeal from the judgment apd order dated March 8, 1956, of the Bombay High Court in Income-tax Reference No. 4of1956. Q. A. Palkhivala, S. N. Andley, Rameshwar Nath, J.B. Dad,achanji and P. L. Vohra, for the appellant. A. N. Kripal and D. Gupta, for the respondent. 1960. December 7. The Judgment of the Court was delivered by Bombay HIDAYATULLAH, J.-This appeal, on a certificate by Hidayatullah J. the High Court, has been filed by Shree Cbangdeo Sugar Mills, Ltd., to which s. 23A of the Income-tax Act (prior to its amendment by the Finance Act, 1955) .: was applied in respect of the assessment year, 1948-49. The question which was referred to the High Court was whether at the relevant time the assessee Com- pany could be deemed to be a Company, in which the public were substantially interested. This question was answered in the negative by the High Court. During the assessment year, the Company had not distributed dividends to the extent of ·60 per cent. of its profits, and an order under s. 23A(l) of the Indian Income-tax Act was passed by the Income-tax Officer. The Company appealed to the Appellate Assistant Commissioner, who dismissed the appeal. It next appealed to the Tribunal, but was unsuccessful. The Tribunal, however, referred the above question which, as already stated, was answered in the negative by the High Court. The issued, subscribed a.nd paid-up capital ef the assessee Company consisted of 60,000 shares, which were distributed as follows: 1960 Shree Changden Sugar Mills, Ltd. v. Commissioner of I mo me-tax, Bombay Hidayatullah ]. 992 SUPREME COURT REPORTS [1961] (1) 11 Directors of the Company (2) The Managing Agency Firm (3) Mysore Merchants Ltd. (4) Others .. . 41,500 shares. 2,300 shares. . . . 11,880 shares. 4,320 shares. 60,000 shares. The question arose in determining .whether the pub- lic were substantially interested in the Company, that is to sa
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