9911796707
|
Home
Issues Involved:
1. Applicability of Section 23A of the Indian Income-tax Act, 1922. 2. Free transferability of shares to the public. 3. Tribunal's jurisdiction to call for additional facts and reports. Issue-wise Detailed Analysis: 1. Applicability of Section 23A of the Indian Income-tax Act, 1922: The Income-tax Officer determined that the assessee company was not one in which the public were substantially interested, as equity shares carrying not less than 25% of the voting power were not beneficially held by the public. Consequently, an order was passed under section 23A(1) of the Act, treating the sum of Rs. 2,43,588 as deemed dividend distributed among the shareholders. The Appellate Assistant Commissioner, however, found that one shareholder, Saroja Mills, was a company in which the public were substantially interested and held more than 25% of the voting power in the assessee-company, thus satisfying the first condition of section 23A. The Tribunal upheld this view but remanded the case to ascertain the free transferability of shares. 2. Free Transferability of Shares to the Public: The Tribunal initially found that the shares were not freely transferable to the public, contrary to the Appellate Assistant Commissioner's view. The Tribunal called for a report on the free transferability of shares, considering transfers both before and after the relevant previous year. The High Court in East India Corporation Ltd. v. Commissioner of Income-tax held that transfers of shares subsequent to the relevant previous year could be considered to determine whether the company is one in which the public are substantially interested. The High Court emphasized that the factual tendency towards free transfer of shares, subject to reasonable restrictions, should be assessed. The Tribunal's subsequent actions were in line with this directive, examining the genuineness and character of the transactions to determine if the shares were indeed freely transferable. 3. Tribunal's Jurisdiction to Call for Additional Facts and Reports: The Tribunal's jurisdiction to call for additional facts and reports from the Appellate Assistant Commissioner was contested by the assessee. The Tribunal justified its actions based on the High Court's directions to consider transfers both before and after the relevant previous year. The Tribunal's powers under section 66(5) of the Act, as interpreted in various cases like Income-tax Appellate Tribunal v. S. C. Cambatta and Co., Rajkumar Mills Ltd. v. Income-tax Appellate Tribunal, and Hukumchand Mills Ltd. v. Commissioner of Income-tax, were reaffirmed. These cases established that the Tribunal, when disposing of an appeal conformably to a High Court judgment, exercises its appellate powers under section 33, including the power to remand. The Tribunal's actions were thus within its jurisdiction, as it sought to gather necessary facts to comply with the High Court's judgment. Conclusion: The High Court affirmed the Tribunal's jurisdiction to call for a report from the Appellate Assistant Commissioner regarding the transfer of shares, emphasizing that the Tribunal's actions were in line with the High Court's directive to consider transfers both before and after the relevant previous year. The Tribunal was justified in its approach to ensure a thorough examination of the free transferability of shares and the applicability of section 23A of the Act. The question referred to the High Court was answered in the affirmative, and the judgment was rendered against the assessee with costs.
|
