Director-control depends on registered voting strength, while managing agents' commission may constitute a debt due by the company.

For director-control under the Excess Profits Tax Act, the relevant test is whether the directors held a controlling voting interest based on the shares standing in their names and the votes attached to those shares, rather than on speculative assumptions about how other shareholders might exercise voting rights. On that basis, the directors' shareholding gave them only a minority of the votes, so the company was not director-controlled. On the separate question, the commission payable to the managing agents was treated as a debt due by the company, following the governing principle previously applied by the Court on the same statutory issue.

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Issues: (i) Whether the company was a director-controlled company for purposes of the Excess Profits Tax Act on the basis of the directors' shareholding and voting strength. (ii) Whether the commission due to the managing agents was a debt due by the company or borrowed money for the purpose of rules 2 and 2A of Schedule II to the Excess Profits Tax Act.

Issue (i): Whether the company was a director-controlled company for purposes of the Excess Profits Tax Act on the basis of the directors' shareholding and voting strength.

Analysis: The relevant test was whether the directors had a controlling interest, meaning control of voting power sufficient to carry resolutions at a general meeting. The determination was to be made by reference to the shares standing in the directors' names and the votes attached to them, not by speculative inquiry into whether other shareholders could in fact exercise their votes during the material period. Since the directors held 7,471 shares out of 15,600, they controlled only a minority of the total votes.

Conclusion: The company was not a director-controlled company, and the answer to the first question was in the negative.

Issue (ii): Whether the commission due to the managing agents was a debt due by the company or borrowed money for the purpose of rules 2 and 2A of Schedule II to the Excess Profits Tax Act.

Analysis: The issue was covered by an earlier decision of the same Court on the same statutory question, and the governing principle applied there was treated as decisive of the present reference.

Conclusion: The commission due to the managing agents was a debt due by the company.

Final Conclusion: The reference was answered partly against the assessee on the question of director control and partly in its favour on the character of the managing agents' commission.

Ratio Decidendi: For determining whether a company is director-controlled, the relevant inquiry is confined to the directors' registered shareholding and the voting power attached to it, and not to extraneous contingencies affecting the actual exercise of votes by other shareholders.

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