TaxTMI 
TaxTMI 
1971 (9) TMI 20
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....voked our jurisdiction under article 136 of the Constitution to appeal against the judgment of the High Court. The special leave asked for was granted and thus he came to file Civil Appeals Nos. 1313-1316 of 1971. The assessee is a private limited company and the concerned assessment years are 1957-58, 1959-60, 1960-61 and 1961-62. The only question for decision in these appeals is whether the assessee company comes within the scope of section 23A of the Indian Income-tax Act, 1922 (to be hereinafter referred to as " the Act ") ? The assessee company was incorporated on October 11, 1941. The objects clause in the memorandum of association contains the usual string of objects. Confining ourselves to the objects relevant for our present purpose, we get in clause (3) of the memorandum power " to acquire and hold shares, stocks, debentures, debenture stocks, bonds, obligations and securities issued or guaranteed by any company constituted or carrying on business in British India ". Sub-clause (p) of that clause empowers the company " to take part in the formation, management, supervision or control of the business or operation of any company or undertaking and for that purpose to app....
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....mmissioner, the assessee took up the matter in second appeal to the Income-tax Appellate Tribunal. The Tribunal agreed with the conclusions reached by the Appellate Assistant Commissioner. Thereafter, at the instance of the assessee, the following two questions were referred to the High Court under section 66(1) of the Act : " (1) Whether, on the facts and circumstances of the case, the Tribunal was justified in holding that the assessee-company is an investment company for purposes of section 23A of the Income-tax Act, 1922 ? (2) Whether the Tribunal was justified in law in holding that while determining the undistributed balance of the total income for charging super-tax under the provisions of section 23A of the Act, no deduction can be allowed in respect of the expenses actually incurred by the assessee company but disallowed for the purposes of computing its assessable income ? " Before the High Court, counsel for the assessee did not press for an answer to the second question. Hence, the High Court did not consider that question. Nor are we called upon to consider that question. The High Court reframed the first question thus : Whether, on the facts and circumstances of t....
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....istributed, if any..." Explanation 2 to that section says : " For the purposes of this section, statutory percentage means,--- (i) in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments .... 100% " We have now to see what exactly is the meaning of the expression " in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments " in the main section 23A and the expression " in the case of a company whose business consists wholly or mainly in the dealing in or holding of investments " in clause (i) of Explanation 2 to section 23A. The Act contains many mind-twisting formulas but section 23A along with some other sections takes the place of pride amongst them. Section 109 of the 1961 Income-tax Act which has taken the place of the old section 23A of the Act is more understandable and less abstruse. But in these appeals we are left with section 23A of the Act. Clause (i) of Explanation 2 to section 23A concerns itself with a company whose business consists " wholly or mainly in the dealing in or holding of investments ". The word " mainly " in that clause as well as in the main se....
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....rying on the business of dealing in stocks and shares. In that case this court was considering whether the dividend income of the assessee-company therein could be considered as business income under section 10 of the Act. Therein this court was not considering the scope of section 23A. But all the same in that case this court proceeded on the basis that no one can make a business of investing. But then section 23A speaks of the business of " holding of investments ". We were told by the counsel for the assessee that that expression is an incongruous one and that we should, following the decision of this court in Bengal and Assam Investors Ltd. hold that there is nothing like a business of " holding of investments ". We feel unable to accede to that contention. We cannot say that the legislature did not know its own mind when it used that expression in section 23A. We must give some reasonable meaning to that expression. No part of a provision of a statute can be just ignored by saying that the legislature enacted the same not knowing what it was saying. We must assume that the legislature deliberately used that expression and it intended to convey some meaning thereby. The express....
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....s held as stock--in-trade, (i) interest on debentures 369 342 309 312 (ii) Dividends 3,40,695 4,68,775 5,48,325 5,53,999 (iii) Dealing in shares 23.867 16,755 28,329 22,100 (iv) Share transfer fee to 10 10 10 10 Total of Nos. (i) to (iv) 3,64,941 4,85.882 5,76,973 5,76,421 4. Income from interest 4,595 3,358 15,276 23,61 ? In order to find out the implications of this statement we have to first decide whether the assessee-company can be said to be a company engaged in the business activity of " holding of investments ". The finding of the Tribunal on this point is stated thus : " We agree with the assessee that the shares in the managed-companies were acquired with a view to safely hold the managing agencies, but we do not agree that for that reason only those shares cannot be taken into account for the purpose of a business of dealing in or holding of investments. " All the shares held by the assessee-company as its investments were the shares of the two companies of which it was a managing agent. It invested in no other shares. The Tribunal has found that the managed-company's shares were acquired by the assessee-company for the purpose of saf....