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Issues:
1. Status of the assessee-company as a company in which public are substantially interested. 2. Disallowance of Rs. 1,95,000 under section 43B with reference to municipal taxes. Issue 1: Status of the assessee-company as a company in which public are substantially interested: The primary issue in this appeal was whether the assessee-company could be considered a company in which the public are substantially interested as per section 2(18)(a) of the Income Tax Act. The company initially had 40% shares held by the Government of Maharashtra, which reduced to 27.31% due to the issuance of right shares. The question was whether the company still qualified as a company in which the public are substantially interested. The assessee argued that the absence of specific language requiring the government to hold 40% shares throughout the year should not disqualify them. They relied on a Bombay High Court decision to support their contention. On the other hand, the departmental representative emphasized the need for a strict interpretation to determine the company's status, citing principles of interpretation and a Supreme Court decision. The Tribunal considered the legislative intent, object of the enactment, and rules of interpretation. They concluded that the company did not meet the criteria of being a company in which the public are substantially interested, as required by section 2(18)(a). Issue 2: Disallowance under section 43B with reference to municipal taxes: The second issue pertained to the disallowance of Rs. 1,95,000 under section 43B concerning municipal taxes. Both parties agreed that a previous Tribunal decision in the assessee's own case established that the liability for municipal taxes rested with the landlord, not the assessee. The assessee was only required to reimburse 50% of the taxes to the landlord upon receipt submission. Therefore, the provisions of section 43B could not be applied in this scenario. The Tribunal modified the order of the CIT(A) and deleted the disallowance under section 43B. The matter was restored to the Assessing Officer for further examination of the claim under section 37(1) of the Act. Following the precedent set by the Tribunal's earlier decision in the assessee's case, the disallowance was overturned, and the appeal was partly allowed. In conclusion, the Tribunal upheld the decision regarding the status of the assessee-company and allowed the appeal partially concerning the disallowance under section 43B. The judgment emphasized the importance of a strict interpretation of tax provisions and the need to consider the legislative intent and object of the enactment in determining the tax status of a company.
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