De facto control and beneficial shareholding brought company benefits within taxable income under section 2(6C)(iii).

Section 2(6C)(iii) of the Income-tax Act, 1922 applied to assessment year 1955-56 even though the relevant previous year ended before 1 April 1955, because income-tax amendments operate by reference to the assessment year for which they are made effective. The phrase "concerned in the management of the business of the company" was construed broadly to include de facto control, not merely formal office or ostensible management. As the assessee held beneficial ownership of more than 20 per cent of the voting power and controlled Bharat Union Agencies P. Ltd., the benefit received from the company fell within the provision and was taxable. The reference was answered in favour of the Revenue.

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Issues: (i) whether the amendment introducing section 2(6C)(iii) of the Income-tax Act, 1922 applied to assessment year 1955-56 though the relevant previous year ended before 1 April 1955; (ii) whether the assessee's receipt of benefits from Bharat Union Agencies P. Ltd. fell within section 2(6C)(iii) as a person having substantial interest and being concerned in the management of the company's business.

Issue (i): whether the amendment introducing section 2(6C)(iii) of the Income-tax Act, 1922 applied to assessment year 1955-56 though the relevant previous year ended before 1 April 1955.

Analysis: The amendment was made operative by the Finance Act, 1955 in relation to the assessment year for which it was intended to apply. The statutory dates in income-tax legislation operate with reference to assessment years and not merely to the accounting year of the assessee. The fact that the previous year had ended before 1 April 1955 did not prevent application of the amended provision to the assessment year 1955-56.

Conclusion: The amended provision applied to assessment year 1955-56 and the assessee's objection on timing failed.

Issue (ii): whether the assessee's receipt of benefits from Bharat Union Agencies P. Ltd. fell within section 2(6C)(iii) as a person having substantial interest and being concerned in the management of the company's business.

Analysis: The expression "concerned in the management of the business of the company" was held to be wide enough to include de facto control exercised indirectly and imperceptibly, and not merely formal or ostensible management by a director or office-holder. The assessee had beneficial ownership of more than 20 per cent of the voting power in Bharat Union Agencies P. Ltd. and was found to control the company. The clause was therefore satisfied. The contrast with the 1961 Act did not alter the meaning of the earlier provision.

Conclusion: The benefit of Rs. 53,398 from Bharat Union Agencies P. Ltd. was income within section 2(6C)(iii) and was rightly brought to tax.

Final Conclusion: The reference was answered in favour of the Revenue, and the assessee's challenge to the taxability of the sum received from Bharat Union Agencies P. Ltd. failed.

Ratio Decidendi: For section 2(6C)(iii) of the Income-tax Act, 1922, a person need not hold a formal office in the company; de facto control coupled with the prescribed beneficial shareholding is enough to make him a person concerned in the management of the company's business.

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