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Issues Involved:
1. Whether the assessee-company was a company in which the public were substantially interested for the assessment years 1956-57, 1959-60, and 1960-61. 2. Whether the Tribunal's finding that the declaration of a larger dividend for the assessment years 1956-57, 1959-60, and 1960-61 would not have been unreasonable was erroneous in law. Issue-wise Detailed Analysis: 1. Whether the assessee-company was a company in which the public were substantially interested for the assessment years 1956-57, 1959-60, and 1960-61: The court examined the interpretation of Section 23A of the Indian Income-tax Act, 1922, as it stood before and after its amendments in 1955 and 1957. For the assessment year 1956-57, the relevant provision was the one as amended in 1955, and for the assessment years 1959-60 and 1960-61, the relevant provision was as amended by the Finance (No. 2) Act of 1957. For the assessment year 1956-57, the court noted that the requirements of all three sub-clauses (i), (ii), and (iii) of clause (b) of the Explanation to Section 23A had to be cumulatively satisfied. The court found that the requirement of sub-clause (iii) was not satisfied because more than 50% of the shares were held by Sheveroy Estates Ltd., which constituted less than six persons holding more than 50% of the total voting power. The court concluded that the term "person" in sub-clause (iii) included a corporate entity like Sheveroy Estates Ltd., and thus, the assessee-company could not be treated as a company in which the public were substantially interested for the assessment year 1956-57. For the assessment years 1959-60 and 1960-61, the court considered the statutory provision as amended by the Finance (No. 2) Act of 1957, which excluded companies to which the provisions of Section 23A did not apply in computing the number of six persons. As Sheveroy Estates Ltd. was a company in which the public were substantially interested, it had to be excluded in the computation of six persons. Consequently, the assessee-company fulfilled the requirement of sub-clause (iii) of clause (b) of the Explanation for these years. The court also found that the requirement of sub-clause (ii) was satisfied as the shares of the company were freely transferable, and the requirement of sub-clause (i) was fulfilled because Sheveroy Estates Ltd. was a company in which the public were substantially interested and thus fell within the scope of "the public." Therefore, the assessee-company was treated as a company in which the public were substantially interested for the assessment years 1959-60 and 1960-61. 2. Whether the Tribunal's finding that the declaration of a larger dividend for the assessment years 1956-57, 1959-60, and 1960-61 would not have been unreasonable was erroneous in law: The court noted that the Tribunal had found, based on the materials available, that no long-term plans were envisaged by the assessee-company and that there were sufficient reserves to meet necessary capital expenditure. The Tribunal agreed with the Appellate Assistant Commissioner that the declaration of a larger dividend would not have been unreasonable. This finding was based on the facts and was not challenged by asking for a reference of an appropriate question. Therefore, the court concluded that the Tribunal's finding was not erroneous in law. Judgment: The court answered the first question in the affirmative and against the assessee for the assessment year 1956-57, and in the negative and in favor of the assessee for the assessment years 1959-60 and 1960-61. The second question was answered in the negative and against the assessee, confined only to the assessment year 1956-57. There was no order as to costs.
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