1998 (9) TMI 16 - HC - Income Tax

Interpretation of 'Company in Public Interest' under Income-tax Act, 1961

Commissioner Of Income-Tax Versus Indian Potash Ltd.

Commissioner Of Income-Tax Versus Indian Potash Ltd. - [2000] 246 ITR 805, 119 TAXMANN 155 Issues: Interpretation of statutory provision defining 'company in which the public are substantially interested' under the Income-tax Act, 1961.Analysis:The judgment addressed the interpretation of section 2(18)(b)(B) of the Income-tax Act, 1961, defining a 'company in which the public are substantially interested.' The court rejected the Revenue's argument that the shares must be held exclusively by the Government, statutory corporation, company, or public for a company to be considered as substantially interested by the public. The court emphasized that the shares can be held by any of these entities cumulatively, and the interest of the public is established when the shares held by these entities collectively exceed 50%. The court highlighted that substantial interest is indicated when the shares held by these entities aggregate to 50% or more, whether held singly or jointly. The judgment emphasized that the construction proposed by the Revenue was not supported by the language or the object of the provision. The court upheld the Tribunal's view that the shares held by public sector undertakings and the cooperative sector should be considered cumulatively to determine substantial public interest in the company.The court also addressed the requirement of calling for a reference in cases where questions of law are raised. It emphasized that a reference should be made only when the question calls for a debate or deeper examination, not when the answer is evident from a mere reading of the provision. The court stated that merely proposing a construction that the section cannot bear does not constitute a referable question of law. It was highlighted that the court is not obligated to call for a reference solely to provide an obvious answer after a prolonged period, causing inconvenience to the assessee.In conclusion, the court dismissed the tax cases petitions, stating that the questions raised did not merit a reference. The judgment emphasized the importance of interpreting statutory provisions in alignment with their language and objectives, ensuring that the interest of the public in a company is considered substantially when the shares held by various entities collectively exceed the specified threshold. The court's decision provided clarity on the interpretation of the relevant provision under the Income-tax Act, 1961, regarding companies in which the public are substantially interested.