1979 (2) TMI 60

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....law? " The assessment years in question are 1960-61, 1961-62 and 1962-63. The shareholding of the several shareholders of the assessee-company have been found to be as follows : No. of shares 1. Shri R . D. Birla 50 2. Smt. Sharda Devi Birla 50 3. Smt. Gopi Kumari Birla 50 4. Shri Ashok Vardhan Birla 50 5. Messrs. Assam Jute Supply Co. Ltd. 50 6. Messrs. Gwalior Webbing Co. Ltd. 225 7. Messrs. Punjab Produce & Trading Co. Ltd. 36 ------------------ 511 ------------------ The ITO having come to a finding, into the details of which we do not think it necessary to go, that the assessee-company was a company in which the public were not substantially interested, levied penal super-tax at the rate of 50% of....

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....trol of more than six persons, it considered it unnecessary to advert to the provisions of the Companies Act. The Tribunal having dismissed the appeals filed by the revenue, the question reproduced earlier has been referred to us at the instance of the revenue. When this reference was called out for hearing, Mr. Mehta who appears for the assessee drew our attention to a circular issued by the Central Board of Direct Taxes dated 5th April, 1974, which refers to the amendment in the definition of a company in which the public are substantially, interested made in s. 2(18) with effect from 1st April, 1965. Explaining the effect of the amendment, the circular states as follows : " The effect of the amendment was : (i) That a company wh....

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....", observed as follows after referring to the decision in West Derby Union v. Metropolitan Life Assurance Society [1897] AC 647 (HL) : " In the light of the principle laid down in this decision it is clear that when two categories of persons, namely, a director or a company to which this clause does not apply, are said to be not included in the expression 'the public', every other category of persons must, by implication, be deemed to be included in the expression 'the public'. Otherwise, the exclu- sion of certain persons or companies alone becomes meaningless. Thus understood, a company in which the public are substantially interested clearly comes within the expression 'the public' in section 2(18)(b)(i) of the Act." Adverting to t....