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Issues Involved:
1. Whether the Tribunal erred in law in holding that the assessee-company was one in which the public are substantially interested within the meaning of section 23A of the Indian I.T. Act, 1922. Issue-Wise Detailed Analysis: 1. Whether the Tribunal erred in law in holding that the assessee-company was one in which the public are substantially interested within the meaning of section 23A of the Indian I.T. Act, 1922: The assessment years involved are 1950-51 and 1951-52. The assessee is a company. The relevant portion of the Explanation to section 23A(1) of the Indian I.T. Act, 1922, as it stood prior to its amendment in 1955, defines a company in which the public are substantially interested if shares carrying not less than twenty-five percent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and are at the end of the previous year beneficially held by, the public. The Supreme Court could not answer question No. 1 earlier because the Tribunal did not make any enquiry as to whether the members of the Kedia family, who were holding 4,015 shares out of 4,391 shares of the company, were "acting in concert in relation to the affairs of the company which establishes the existence of a block." Mr. N. C. Mukherjee, the learned counsel for the company, was not allowed to reagitate questions Nos. 2 and 3 because: (i) These questions were already answered against the company by the Division Bench. (ii) The company did not prefer any appeal to the Supreme Court on these questions. (iii) The appeal before the Supreme Court was solely confined to question No. 1. (iv) Any appeal by the company on these questions is now barred by limitation. (v) The judgment dated August 17, 1962, has become final on these questions. Dr. Pal, the learned counsel appearing with Mr. Mukherjee, argued that the company was one in which the public were substantially interested because the Kedia family members were holding less than 75 percent of the share capital. However, this contention was rejected as it was against the Supreme Court's earlier findings where it was held that the Kedia family held 4,015 shares, which was in excess of seventy-five percent of the total shares issued by the company. The Tribunal's supplementary statement concluded that the Kedia family members acted in concert. Dr. Pal attacked this conclusion on the ground of perversity but eventually gave up this point, acknowledging the lack of provision in the I.T. Acts to challenge such conclusions. Dr. Pal argued that the members of the Kedia family were not acting in concert and there was no existence of any block. However, Mr. B. L. Pal, the learned counsel for the revenue, contended that the inference drawn by the Tribunal should not be disturbed, citing the finding of the AAC that a few members of the Kedia group controlled the affairs of the company based on shareholder attendance in annual general meetings from 1946 to 1950. Dr. Pal countered that the burden was on the revenue to prove that the Kedia shareholders were acting in concert, referencing the larger Bench decision in CIT v. Gangadhar Banerjee & Co. (Private) Ltd. However, the Supreme Court in Sahu Jain's case [1976] 103 ITR 135 emphasized that when a company is composed mostly of family members owning a lion's share, the onus is on the shareholders to provide positive evidence about the absence of control by the controlling shareholders. The Tribunal did not make any enquiry into the conduct and activities of the Kedia shareholders in relation to the company's affairs. The Tribunal also overlooked the resolutions of the board of directors and the proceedings in the annual general meetings, which are relevant considerations as per Sahu Jain's case. Given the lack of relevant facts and materials on question No. 1, the court was unable to answer the question. The Tribunal is directed to submit a further supplementary statement of the case within 6 months, containing the relevant facts and materials as indicated in the judgment and the conclusions of the Tribunal on these facts as directed by the Supreme Court. Conclusion: The Tribunal is instructed to provide a further supplementary statement of the case to enable the High Court to answer question No. 1, considering the relevant facts and materials as indicated in the judgment. The parties shall bear their own costs.
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