Law:

Section:

Section 104 of the Income-tax Act, 1961 [Corresponding to section 23A of the Indian Income-tax Act, 1922] - Additional income-tax on undistributed profits of certain companies - Assessment year 1954-55 - Whether a company cannot be deemed to be a company within meaning of Explanation to section 23A of 1922 Act, if shares carrying 75 per cent or more of voting power are vested in a single shareholder or a group of shareholders acting in concert - Held, yes - Whether such a shareholder or a group cannot be regarded as "public" within meaning of word as used in Explanation to section 23A of 1922 Act and shares held by such shareholder or group cannot be regarded as shares held unconditionally and beneficially by public - Held, yes Words and Phrases - Word "public" as occurred in section 23A of the Indian Income-tax Act, 1922. FACTS Out of the total of 30,000 shares of the assessee-company's capital, 29,893 shares were held by its parent company known as company 'P'. The parent company was admittedly a company in which the public were substantially interested. The shares of the assessee-company held by the company 'P' were not the subject of any dealings in any stock exchange and they were freely transferable. During the accounting year relevant to the assessment year the assessee declared certain dividend. Since the aforesaid amount was less than 60 per cent of assessable income, the ITO held the provisions of section 23A of the 1922 Act, as it stood at the material time, were attracted. On second appeal, the Tribunal held that the assessee was not entitled to exemption from the operation of section 23A of the 1922 Act either on the ground that it was a company in which the public were substantially interested or on the ground that it was a subsidiary of a company in which the public were substantially interested. It also further held that the additional argument advanced before it viz., that the order under section 23A of the 1922 Act should not have been made against it having regard to the smallness of its profits, was not available to the assessee. On reference: HELD In order to substantiate its claim for exemption under the first part of the third proviso to…

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