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TMI Blog1972 (6) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of the assessment of the assessee-company in I.T.R. No. 31 of 1970 for the year 1962-63, 55 per cent. of the equity shares of that company were held by Messrs. J. H. Vavasseur Co. Ltd. During the period between December 31, 1962, and December 31, 1963, which was the previous year for assessment of the assessee-company in I.T.R. No. 32 of 1970, the same M/s. Vavasseur Co. Ltd. held 54.68 per cent. of the equity shares of the assessee-company. It is not disputed that Messrs. J. H. Vavasseur Co. Ltd. was a company in which the public were substantially interested during the relevant previous years. The Income-tax Officer, Companies Circle, Ernakulam, in passing the assessment orders, treated the status of the assessee-companies as that of a private limited company. Aggrieved by the determination of that status the assessees filed appeals before the Appellate Assistant Commissioner of Income-tax, Ernakulam. The Appellate Assistant Commissioner found that the description of the assessee-companies as private limited companies was wrong. But, according to him, what the Income-tax Officer wanted to convey was only that these were companies in which the public were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dian Income-tax Act, 1922, was this. By section 23A, undistributed profits of a company, subject to some restrictions and conditions, were deemed to be distributed as dividends and the proportionate share thereof of each shareholder was directed to be included in the total income of the shareholder for the purpose of his assessment. Under section 23A, as it stood prior to 1955 amendment, all companies were not sought to be roped in. A company in which the public were substantially interested and a subsidiary company of such a company if the whole of the share capital of such subsidiary company was held by the parent company or by the nominees thereof, were exempted. A company in which the public were substantially interested was also defined thus: " Explanation.-For the purpose of this sub-section,- a company shall be deemed to be a company in which the public are substantially interested if shares of the company (not being shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits) carrying not less than twenty-five per cent. of the voting power have been allotted unconditionally to, or acquired unconditionally by, and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(18) was again amended thus: " 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 not a private company, as defined in the Companies Act 1956 (1 of 1956), and (i) its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) 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 year beneficially held by- (a) the Government, or (b) a corporation established by a Central, State or provincial Act, or (c) any company to which this clause applies or any subsidiary company of such company where such subsidiary company fulfils the conditions laid down in clause (b) of section 108 (hereinafter in this clause referred to as the subsidiary company), or (d) the public (not being a director or a company to which this clause does not apply)." From this amendment, the department takes the stand that before this, companies like the assessee-companies did not come with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of this use of an exception or a proviso. Paragraphs 28 and 29 of the Supreme Court decision read as follows: "(28) There is no doubt that where the main provision is clear its effect cannot be cut down by the proviso. But where it is not clear the proviso, which cannot be presumed to be a surplusage, can be properly looked into to ascertain the meaning and scope of the main provision. By looking at the proviso for this purpose the rule of construction referred to by learned counsel will not be infringed. (29) In the West Derby Union v. Metropolitan Life Assurance Society Lord Watson observed: '....... I perfectly admit that there may be and are many cases in which the terms of an intelligible proviso may throw considerable light on the ambiguous import of the statutory words.' In the same case Lord Herschell admitted that a proviso may be a useful guide in the selection of one or other of two possible constructions of words in the enactment or to show the scope of the latter in a doubtful case." In the light of the principle laid down in this decision it is clear that when two categories of persons, namely, a director or a company to which this clause doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. was a private company and the Supreme Court held : " In our opinion, the paramount condition is that even in that company the public should be beneficially interested in 25 per cent. of the voting power and it was admitted before us that it was not a public company at all but a private company and that, therefore, the public were not interested in that company. The shares held by the Mysore Merchants Ltd. cannot at all be counted as a holding in which the public are beneficially interested in view of the exclusion contained in the explanation." This shows that a company in which the public are substantially interested is included in the expression "the public". This decision was rendered on 7th December, 1960, and we do not find any basis to adopt a different interpretation to the same expression contained in the 1961 Act. This also, according to us, clearly warrants the conclusion which we have arrived at in this case. The learned counsel for the department relied on the Explanatory notes to the clauses of the Finance Bill of 1965 and the speech of the Honourable Minister who piloted the Bill in Parliament and argued that the provision in section 2(18) before its a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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