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TMI Blog1977 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... public are substantially interested. In order to find out what is meant by " company in which the public are substantially interested " one has to go to s. 2(18). The portions of s. 2(l8) relevant for our purposes are as follows: " '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 not a private company as defined in the Companies Act, 1956 (1 of 1956), and (i) its shares ...... carrying not less than fifty per cent. of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous years beneficially held by ...... the public (not being a director, or a compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at no time, during the relevant previous years, controlled or held by five or less persons." The AAC then went into the question whether trusts could, be taken as members of the public. He said: " It is not really the shareholders who are registered in the share register but the beneficial owners of the shares who have to be considered. Undoubtedly, the beneficial owners are the trusts. The charitable trusts are public bodies and the income in their hands have been held to be exempt from taxation. The representative has cited the decision of the Tribunal's Calcutta Bench in the case of Bangur Bros. Ltd., where the Tribunal has held that Mugneeram Ramcoowar Bangur Charitable Trust is a member of the public. In view of the circumstances s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, if the individuals were taken as constituting a block, they did not have a controlling interest. It was only in combination with the trusts that there could be a controlling interest. It was thus necessary to see whether the shares held by the trusts could be treated as those held by the public. The Tribunal came to the conclusion that the trust-shares would not be shares held by the public. The Tribunal held that the assessee was one in which the public were not substantially interested. The following question of law has been referred to us: " Whether, on the facts and in the circumstances of the case, the assessee-company was one in which the public were substantially interested within the meaning of s. 2(18), read with s. 104 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% of the voting power were beneficially held throughout the relevant previous year by the public. There are, therefore, submits Mr. Pal, two conditions imposed by sub-cl. (i) of cl. (b) of s. 2(18) which are cumulative and both must be fulfilled. The shares, in the first instance, should be shown or proved to have been unconditionally allotted to or acquired by the public. It should further be shown or proved that the shares were held by the public beneficially throughout the relevant previous year. If any of these conditions is not fulfilled, the company cannot be said to be a company in which the public are substantially interested. We are inclined to agree with the aforesaid contentions of counsel for the Department. In fact, more or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gur Trustees of Bangur Charitable Trust " holding 800 shares and of " M/s. Gokulchand Bangur and Narsingdas Bangur, Trustees of P. D. Bangur Trust " holding 800 shares. These facts are sufficient to establish that the trustees of these two trusts are not free agents and are under the control of Gokulchand Bangur. In our judgment, the evidence, on which the Department relies, is insufficient to come to the positive conclusion that the two trusts aforesaid are under the control of an individual who runs or manages the affairs of the company. In fact, before the tax authorities no evidence on this matter, it appears to us, has been led at all. We have said that to enjoy the protection of s. 2(18)(b)(i), it is necessary to prove not only that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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