Investment company test under tax law requires a real, systematic business of holding or dealing in investments.

For attracting additional super-tax under section 104, the revenue had to prove that the assessee was an investment company under section 109(ii), meaning its business consisted wholly or mainly in dealing in or holding investments. Mere ownership of investments was insufficient; the decisive test was whether there was a real, substantial and systematic investment business as the company's primary activity. On the facts, the assessee's investments arose from its earlier insurance business, no organised investment business was shown for the relevant year, and a later memorandum change could not alter that position. The court held that the assessee was not an investment company for that year, and the reference was answered against the revenue.

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Issues: Whether, on the facts and in the circumstances of the case, the assessee was an investment company within the meaning of section 109(ii) of the Income-tax Act, 1961, so as to justify levy of additional super-tax under section 104 for the assessment year 1962-63.

Analysis: For attracting section 104, the revenue had to establish that the assessee fell within the definition of an investment company, namely, that its business consisted wholly or mainly in dealing in or holding investments. Mere holding of investments was not enough; the decisive question was whether the company had a real, substantial, systematic or organised business of dealing in or holding investments as its primary activity. The assessee had previously carried on insurance business, its investments had been acquired in the course of that business, and despite cancellation of the insurance registration, the Insurance Act continued to apply to unsatisfied insurance liabilities under section 2D. The materials did not show any organised investment business during the relevant year, and the subsequent alteration of the memorandum could not affect the position for the year in question.

Conclusion: The assessee was not an investment company for the relevant year, and the answer to the reference was against the revenue and in favour of the assessee.

Ratio Decidendi: A company is not an investment company merely because it holds investments; it must be shown that its primary, real and systematic business consists wholly or mainly in dealing in or holding investments.

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