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Determining the status of the assessee as a "company in which the public are not substantially interested" for the assessment years 1976-77 and 1977-78 under section 2(18) of the Income-tax Act, 1961 based on the interpretation of sub-clause (iii) of clause (B)(b). Analysis: The case involved a question regarding the computation of the total shares of a company for determining its voting power under the Income-tax Act, 1961. The assessee, a public limited company, claimed to be a non-controlled (widely held) company. The Revenue argued that the company's voting power was concentrated in less than six persons, making it a company in which the public are not substantially interested. The late shareholder, M. N. Ramakrishnan, held a significant number of shares, and his heirs were registered as members after his death. The articles of association specified that until the shares were registered in the heirs' names, they had no voting power. The total voting power was limited to the remaining shares during that period. The court analyzed the provision under sub-clause (iii) of the Act, emphasizing that the concentration of voting power in less than six persons is a crucial factor. The court highlighted that the total voting power must be determined based on the shares carrying voting power at any given time. The court noted that the provision aims to prevent control of a company by a small group of individuals. In this case, the shares held by the late shareholder's heirs, which had no voting power until registered, were correctly excluded from the computation of voting power. The court agreed with the Appellate Tribunal's interpretation and held that the company's status was as a company in which the public are not substantially interested. Therefore, the court answered the question in favor of the Revenue and against the assessee, affirming that the shares held by the legal heirs of the deceased shareholder should not be considered in computing the total shares of the company for determining its voting power. The judgment will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench for further action.
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