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TMI Blog1993 (2) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent. of the shares were held by Burn Field Ltd., a company incorporated in the United Kingdom. The assessee-company in articles 30 to 36 of its articles of association had provided for certain restrictions on the transfer of shares. These articles were deleted by a special resolution of the company passed on April 25, 1972, a few days before the end of the relevant previous year. For the year under consideration the Income-tax Officer adjudged that the assessee-company was a company in which the public were not substantially interested. The Appellate Assistant Commissioner, however, in appeal accepted the assessee's contention that by virtue of the special resolution passed by the company on April 25, 1972, it should be held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2(18)(b)(B) of the Income-tax Act, 1961, the expression used in Explanation 1 did not hold good in the case of the company with whom the actual control of the assessee-company rests ?" In order to answer these questions, it is necessary to reproduce the relevant provisions of section 2(18) : "Section 2(18). 'Company in which the public are substantially interested'-A company is said to be a company in which the public are substantially interested-. . . (b) if it is a company which is not a private company as defined in the Companies Act, 1956 (1 of 1956), and the conditions specified either in item (A) or in item (B) are fulfilled, namely : (A) shares in the company ( ......... ) were, as on the last day of the relevant previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are relatives of one another, and persons who are nominees of any other person together with that other person, shall be treated as a single person. " The first question which is before us relates to the interpretation of condition (ii) in section 2(18)(b)(B). It is the contention of the Revenue that unless the shares were, throughout the relevant previous year, transferable to the other members of the public, condition (ii) would not be satisfied. Since the restriction on transfers was removed in the case of the assessee only a few days prior to the end of the relevant previous year, the assesseecompany does not fulfil condition (ii). In order to interpret condition (ii), it is necessary to look at the scheme of section 2(18)(b)(B). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t some time during the relevant previous year". The Random House Dictionary, at page 443, defines the word "during" as : (1) throughout the duration, continuance or existence of ; He lived in Florida during the winter, (2) at some point of time ; in the course of; They departed during the night. In view of the fact that the expression is capable of two meanings, one will have to interpret the expression in the context in which it occurs. In the present case, in the preceding and the succeeding conditions, where the entire period of the previous year is sought to be covered, there is a clear use of language to that effect. In condition (ii), however, the phrase "during the relevant previous year" is used. This is in sharp contrast to the spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f it. The Supreme Court said that the Explanation had reference to the point of time at two places. In the first part of the Explanation, there was a reference to at the end of the previous year" and the second reference was in the second part which referred to "in the course of such previous year". The Supreme Court said that if all that was required was that at the end of the previous year the shares should be capable of being dealt with on the stock exchange, the Explanation would have said so when it has used a similar expression in the first part. In this context, therefore, the Supreme Court said that the word " course " ordinarily conveys the meaning of a continuing progress from one point to the next in time or space. The phrase "in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion established by a Central, State or Provincial Act. Similarly, where not less than 50 per cent. of the shares are held by any company to which this clause applies, i.e., any public company, then also the company is to be considered as a company in which the public are substantially interested, and the last category of such a company is a company where not less than 50 per cent. of the voting power is held by the public. Condition (iii) prescribes that in order to qualify as a company in which the public are substantially interested, it is necessary that during the relevant previous year at no time more than 50 per cent. of its shares are controlled or held by five or less persons. On the face of it, therefore, because of this condition, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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