Law: Income Tax Act, 1922

Section: 23A(1)

Section 104 of the Income-tax Act, 1961 [Corresponding to section 23A(1) of the Indian Income-tax Act, 1922] - Additional income-tax on or undistributed profits of certain companies - Assessment year 1948-49 - Whether ITO was competent to pass an order under section 23A(1) after having allowed a rebate of one anna for rupee in assessment under proviso (a) to paragraph (B) of Part I of second schedule of Finance Act, 1948 applicable to those companies to which provisions of section 23A were not applicable - Held, yes - Whether in order to decide whether shares of any company carrying not less than 25 voting powers are held beneficially by public within meaning of Explanation to section 23A(1), one has to see whether there is individual or a group holding controlling interest which group acting in concert can direct affairs of company at its well - Held, yes - Whether in such a group, any person, be he a director or a non-director, a relative of a director, a promoter of company or a stranger, may be included but only if belonging to group or as holding shares as nominee of someone else belonging to group - Held, yes - Whether, therefore, directors could not be required as outside 'public' merely by reason that they were directors - Held, yes - Whether where managing agents, either by themselves or with those who act in concert with them, hold shares above the 75 per cent limit, they can be regarded as constituting a group which cannot be counted as 'public' - Held, yes - Whether in such a case inference is irresistible that there is group which as group can run company at its will and which not only controls voting at meeting of shareholders, but by selecting its own directors, gets directors to act according to its own desires and, therefore, no member of such managing agency firm can be regarded as belonging to "public" and managed company comes within reach of section 23A - Held, yes - Whether in order to decide whether company is controlled by a group, test is not whether they have actually acted in concert but whether circumstances are such that human experience tells that it can safely be taken that they must be acting together - Held, yes - Whether where…

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