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Interpretation of section 2(18) of the Income-tax Act, 1961 regarding shares held by a company in which the public are substantially interested. Analysis: The judgment delivered by the High Court of Bombay pertained to the interpretation of section 2(18) of the Income-tax Act, 1961, specifically focusing on whether shares held by a company in which the public are substantially interested fall under the definition of shares held by the public. The primary issue revolved around determining if the assessee company could be considered a company in which the public are substantially interested based on the statutory provisions for the assessment years 1970-71 and 1972-73. The Income-tax Officer initially concluded that the assessee company did not meet the criteria outlined in section 2(18)(b)(i), leading to the reference to the High Court for clarification. Upon examining the facts of the case, it was revealed that Rank Bush Murphy Ltd., a U.S. company, held approximately 49% of the shares in the assessee company. The Revenue did not contest that Rank Bush Murphy Ltd. qualified as a company in which the public were substantially interested as per section 2(18) of the Income-tax Act, 1961. Citing the decision in CIT v. Baroda Investment Co. Ltd., it was argued that if three companies holding over fifty per cent of the assessee company's shares were considered companies in which the public were substantially interested, then those companies fell under the definition of "public" as per section 2(18)(b)(B)(d). The High Court, drawing parallels to the Baroda Investment Co. Ltd. case, concluded that the answer to the reference question was governed by the principles established in the aforementioned judgment. It was deemed unnecessary to delve into the multitude of authorities discussed in the Tribunal's order, as the resolution was guided by the precedent set by the Baroda Investment Co. Ltd. case. Consequently, the High Court ruled in favor of the assessee, affirming that the shares held by the company in question, which was substantially interested by the public, indeed qualified as shares held by the public within the purview of section 2(18) of the Income-tax Act, 1961. The Revenue was directed to bear the costs of the reference.
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