9911796707
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Determining the tax rate applicability for a company in liquidation under voluntary winding up and the treatment of shares in such a company for tax purposes. Analysis: The case involved two appeals by a company in liquidation against the Commissioner (Appeals) order for the assessment years 1979-80 and 1980-81. The dispute centered around the tax rate to be applied to the company's income from other sources. The company claimed to be treated as a company in which the public was substantially interested, while the Income Tax Officer (ITO) treated it otherwise based on previous assessments. The first appellate authority found that the company's shares were not freely transferable due to liquidation provisions, justifying the treatment accorded. The company contended that the memorandum and articles of association were on record and produced them later. The company argued that the shares were widely held, akin to a public company, citing Supreme Court decisions to support its claim. The departmental representative argued that the company's shares' restrictive nature should be considered along with statutory provisions under section 536, which rendered transfers without the liquidator's sanction void. Referring to a Bombay High Court decision, the representative contended that the liquidator should be considered a single individual controlling the company. The Tribunal carefully considered the arguments and facts, noting that the company was widely held, qualifying it as a public company in which the public was substantially interested. The Tribunal emphasized that clauses giving directors discretion to refuse share transfers were common in public companies and not meant for arbitrary actions. It cited Supreme Court cases to support that such clauses did not vitiate share transfer claims unless directors acted against the company's interest. Regarding the liquidator's role, the Tribunal rejected the argument that the liquidator should be considered a single individual controlling the company, emphasizing that the liquidator was an agent of the company for winding-up purposes. The Tribunal distinguished the liquidator's role from that of a public trustee, stating that the liquidator was accountable to shareholders and not a single controlling entity. Ultimately, the appeals were allowed, and the company was entitled to be taxed as a company in which the public was substantially interested, based on the widely held nature of its shares and absence of sanctioned transfers post-liquidation.
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