Law: Income Tax Act, 1922

Section: 23,23A(1),Expl.I(b)(ii)(b)

[Income Tax Act, 1922 (XI of 1922)]......Section 23A(1), Expl. I(b)(ii) (b) fore amendment in 1968) Public limited company-Company in which public is substantially incercsted-Slmres of company subject of dealing in recognised Stock Exchange in the relevant previous year-Free transfer of shares by holders to other members of public permitted only a few days before the close of the relevant previous year-Whether company can be deemed to be a company in which public is substantially interested for the whole year-HeId yes Whereas the income Tax Officer had refused to treat the assessee company as one in which the public is substantially interested for the Whole of the relevant year for the reasons that although its shares were quoted in the recognised Stock Exchange these were made freely transferable to the other members of the public only 6 days before the end of the relevant previous year and as such the conditions laid down in the second part of sub-clause (ii) of clause (b) of Explanation 1 of Section 23A(1) were not fulfilled, Consequently, it was entitled to claim to be such a company only from the date the shares were made freely transferable to the members of the public. Held, that one of the alternate conditions having been satisfied during the relevant previous year although for only 6 days before its close the conditions envisaged by clause (1)(b)(ii) was duly satisfied and the appellant company should be accorded the status of a company in which the public is substantially interested. JUDGMENT [The order was passed by K. SALAHUDDIN, Accountant Member].- This appeal arises from the assessment made on the appellant for the charge year 1967-68. The first objection pressed before us is to the following effect: - "The learned Income Tax Officer has further erred in not treating the company as one in which the public is substantially interested within the meaning of Explanation 1 to Section 23A(1) of the Income Tax Act for the whole of the year. Your appellant contends that the learned Officer's action in treating the company both as a private and a public company within the meaning of the Income Tax Act in the same assessment year is unwarranted and bad in…

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