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Issues Involved:
1. Whether the assessee-company was a company in which the public were substantially interested within the meaning of the relevant provisions of the Income-tax Act, 1922, and 1961. 2. Whether the shareholdings of M/s. R. P. Goenka & Ors. should be excluded from consideration due to their legal status. 3. Whether the relationship among the shareholders met the requirements of the provisions of the Income-tax Act. Issue-wise Detailed Analysis: Issue 1: Public Interest in the Company The primary question was whether the assessee-company could be deemed to be one in which the public were substantially interested under section 23A of the Indian Income-tax Act, 1922, and section 104 of the Income-tax Act, 1961. The relevant provisions required that the shares carrying more than fifty percent of the total voting power should not be controlled or held by less than six persons. The Income-tax Officer found that the shares were held by a few individuals and their relatives, thus not meeting the criteria for public interest. Issue 2: Legal Status of M/s. R. P. Goenka & Ors. The assessee contended that M/s. R. P. Goenka & Ors. were not capable of holding shares and exercising voting rights, and thus their shares should be excluded. However, the Tribunal and the court found that despite the legal technicalities, the shares were registered in the name of M/s. R. P. Goenka & Ors., and thus could not be excluded from consideration. The court referred to the case of Vagliano Anthracite Collieries Ltd., In re [1910] WN 187, and the Supreme Court decisions in Commissioner of Income-tax v. Shakuntala [1961] 43 ITR 352 (SC) and Commissioner of Income-tax v. C. P. Sarathy Mudaliar [1972] 83 ITR 170 (SC), to support the view that the registered shareholder is the one recognized for voting rights and other purposes under the law. Issue 3: Relationship Among Shareholders The assessee argued that the relationship among the shareholders did not meet the requirements of the provisions of the Act. The court analyzed the definition of "relative" under sub-clause (iii) of clause (b) of Explanation 1 of section 23A of the Indian Income-tax Act, 1922, which includes husband, wife, lineal ascendant or descendant, brother, or sister. The court found that while R. P. Goenka and Jagadish Pd. Goenka were brothers and thus related, Smt. Sushila Devi Goenka was not related to either K. P. Goenka or Jagadish Pd. Goenka under the given definition. Therefore, the shares held by Smt. Sushila Devi Goenka could not be clubbed with those of the other Goenkas, altering the calculation of shares held by less than six persons. Conclusion: The court concluded that the assessee-company did not meet the criteria for being a company in which the public were substantially interested because the shares held by Smt. Sushila Devi Goenka could not be considered in the same group as the other Goenkas. Consequently, the mischief of section 23A could not be applied to the company. Each of the questions for the three assessment years was answered in the negative and in favor of the assessee, with each party bearing its own costs.
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