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TMI Blog1986 (1) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee trust, the shares in the company of Usha Sales (P) Ltd. were hit by the provisions of s. 13(3) of the IT Act r/w s. 21A of the WT Act. On that view he held that these shares could not qualify for exemption. Valuing these shared at Rs. 54,968 he levied tax for the asst. yr. 1974-75. For the asst. yr. 1975-76 he brought to tax the shares in this company valued at Rs. 1,12,256. Similarly the the value of these shares worked out at Rs. 1,22,598 for the asst. yr. 1976-77 and wealth-tax was levied thereon. But for the asst. yr. 1977-78 which assessment was made under s. 16(5) of the WT Act the shares held by the assessee trust in M/s Jay Engg. Works Ltd. was considered prohibited one and hit by s. 13 of the IT Act and the value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he mode of acquisition, it is the holding of shares that it referred to in s. 13(3) of the IT Act and that is only relevant. But Shri G. C. Sharma appearing for the assessee submitted without depending upon the decision of the Tribunal in the case of Sir Shanker Lal Foundation that the voting power as reckoned by the ITO was totally erroneous and filed before us a statement showing how the voting power would be below 20 per cent mentioned in s. 13(3) of the IT Act. Proceeding on that footing he submitted that since the voting power was less than 20 per cent there is no question of the share in the company Usha Sales (P) Ltd. being treated as prohibited person within the meaning of s. 13(3) of the IT Act. He than submitted that even if the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. For the asst. yr. 1974-75 the shares held by the founding members contributors and relatives was 44060 in Usha Sales (P) Ltd. That was also the amount arrived at by the WTO. There was therefore no disagreement to that extent. The total issue of the enquire share capital was 1,80,000 and preference shares 60,000. The voting power of both equity and preference shares put together works out to 96,000 but the WTO computed it at 36,000. He excluded the voting power attached to the preference shareholdings. The question now is whether the voting power of preference shareholders should or should not be excluded for the purpose of finding out the total voting power. Explanation 3 to sub-s. (4) of s. 13 laid down, who will be a person wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the preference shares in calculating this percentage. This point also has come up for consideration in the case of WTO vs. Sir Shanker Lal Foundation in WTA Nos. 271 272 of 1980 for the asst. yrs. 1973-74 and 1974-75. The bench had upheld such a view. In fact that was the view taken by an earlier Bench of the Tribunal which they followed for these years. We therefore hold that the votes held by the prohibited persons does not exceed the percentage fixed in the Explanation extracted above and consequently they cannot be treated as prohibited persons hit by s. 13(3) of the IT Act and s. 21A of the WT Act i.e., to say that there is no question of those persons holding a substantial interest in Usha Sales (P) Ltd. within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trust must be treated as an individual and all the provisions of the WT Act applicable to individuals are applicable to the trustee also. If the Provisions applicable to individuals are made applicable to the trustee, then the trustee would be entitled to the basic exemption as well as the exemption available to shares, the total of which exceeds Rs. 2 1/2 lacs. Since the value of the shares in Jay Engg. Works Ltd. was computed at Rs. 2,11,472, which was below Rs. 2 1/2 lacs, there was no liability for wealth-tax even though the Jay Engg. Works Ltd. is a prohibited person. So the view taken by the AAC can be supported but for a different reason. Thus we uphold the orders of the AAC for all these years and dismiss these Departmental appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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