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TMI Blog1974 (7) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... eason of the fact that the shares of the company carrying not less than twenty five per cent. of its voting power were not, in fact, freely transferable by holders to other members of the public for a large part of the previous year even though they were freely transferable as at the end of the previous year ? " The assessee is Messrs. East West Import & Export Private Ltd., now known as Asian Distributors Ltd. The assessment year in question is 1951-52, the corresponding previous year being the one ended on 31 of March, 1951, and the question that arises is whether the provisions of section 23A(1) were applicable to the company. Initially the company was incorporated as a private limited company at Jaipur on December 24, 1942, and at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is clear that only two criteria were laid down by this Explanation and they were that : (1) the shares of the company carrying not less than 25 per cent. of the voting power should have been allotted unconditionally to or acquired unconditionally by and beneficially held, at the end of the previous year, by the public ; and (2) such shares should have been the subject of dealings in any stock exchange in the taxable territories in the course of the previous year or should have in fact been freely transferable by the holders to the other members of the public. It was not disputed at any stage of the assessment proceedings that the first criterion was clearly satisfied in the case of this company. The taxing authorities as well as the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-company did not satisfy the particular requirement inasmuch as, according to him, that criterion would have been satisfied if the shares were transferable in the course of such previous year, meaning thereby " throughout the previous year ", and since the attribute of free transferability was got attached to the shares of the assessee-company only for a period of 4 or 5 days prior to the end of the previous year, the criterion could not be said to have been satisfied by the assessee-company. The Income-tax Officer also considered the practical aspect of the matter and came to the conclusion that though the attribute of free transferability was attached to the shares of the assessee-company during the last 4 or 5 days prior to the expiry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares must have the attribute of free transferability at any time during the course of the previous year. The Tribunal accepted both the contentions that were urged on behalf of the assessee-company and came to the conclusion that the assessee-company was a company in which the public were substantially interested and that, therefore, section 23A was not attracted. At the instance of the Commissioner of Income-tax, New Delhi, the question of law mentioned above has been referred to us for our determination. The two parts of the second criterion mentioned in the Explanation ran as follows : " For the purpose of this sub-section, a company shall be deemed to be a company in which the public are substantially interested ...... if any such s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he criterion, viz., the attribute of free transferability, and, in our view, the Tribunal was right in so construing the relevant provisions contained in the Explanation. However, even if the phrase " in the course of such previous year " occurring in the first part of the second criterion indicated in the Explanation is regarded as being applicable to the other part of the criterion dealing with the attribute of free transferability, it is not possible to accept the contention of Mr. Joshi appearing on behalf of the revenue that that phrase should be construed as meaning that the attribute of free transferability of shares should have been present throughout the previous year in question. The phrase " in the course of such previous year " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company at any time during the previous year. That the above interpretation which we are placing on the expression " in the course of such previous year " is correct would further become clear from the manner in which the relevant provisions of the Explanation have been amended in 1957. While amending the relevant Explanation, the legislature has, whenever it wanted, used expressions like, " throughout the previous year " " at any time during the previous year ", and the amendments so effected clearly indicate that the phrase " in the course of such previous year " was intended to mean " at any time during such previous year ". The other contention that was urged before the Tribunal on behalf of the department was that the shares sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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