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Issues Involved:
1. Whether the assessee was a company in which the public are substantially interested for purposes of assessment. 2. Whether the contribution made by the members at the rate of Rs. 20 per mensem per vehicle was taxable as the assessee's income. Issue-wise Detailed Analysis: 1. Whether the assessee was a company in which the public are substantially interested for purposes of assessment: The court examined the definition of "company in which the public are substantially interested" under Section 2(18) of the Income-tax Act, 1961. The relevant part of the definition includes conditions such as ownership by the Government or the Reserve Bank of India, or where not less than forty percent of the shares are held by the Government or the Reserve Bank of India. Additionally, the shares must be freely transferable and not controlled by five or fewer persons. The court noted that the assessee-company did not fulfill all the conditions laid down under Section 2(18). The assessee conceded before the Tribunal that it did not meet the necessary requirements. Therefore, the court agreed with the Tribunal's view that the company could not claim the benefit of being a company in which the public are substantially interested. 2. Whether the contribution made by the members at the rate of Rs. 20 per mensem per vehicle was taxable as the assessee's income: The court considered the background where the assessee-company, incorporated in 1948, managed vehicles of its constituent members and charged a commission of 6% on the total gross monthly income of each vehicle. Due to losses incurred by the management unit, a resolution was passed in the general meeting on September 30, 1967, to neutralize the losses by deducting Rs. 20 per month from the gross income of each vehicle until the losses were wiped out. The Tribunal treated this contribution as additional commission for services rendered by the company. The counsel for the assessee argued that the amount did not represent income as it did not arise out of the business conducted by the assessee and was a donation made by members to cover up losses, being casual in nature. The court referred to Clause 27(a) of the memorandum and articles of association, which allowed the company to charge a commission and authorized the board of directors to distribute losses equally among the vehicles of the members. The court found that the resolution passed by the general body was in line with the business activity of the assessee and the charter of the company. The amounts received were not casual or donations but were a vested right acquired by the assessee to make the deductions sanctioned at the general meeting. These deductions were continuous and periodic until the accumulated losses were wiped out, thus satisfying the test of income. The court distinguished the present case from several cited cases, noting that the amounts received were in pursuance of the company's charter and were part of the business activities, unlike the cited cases where the amounts were either windfalls, casual receipts, or personal gifts. Conclusion: The court answered both questions in the affirmative, in favor of the department and against the assessee. The contributions made by the members were taxable as the assessee's income, and the assessee was not a company in which the public are substantially interested for purposes of assessment. The department was entitled to its costs, assessed at Rs. 200, with counsel's fee also assessed at Rs. 200.
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