9911796707
TMI Blog1980 (4) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed under s. 104 of the Act, the ITO initiated a proposal for levy of additional tax, and the proposal was made to the IAC, Calcutta who was at the material time having administrative jurisdiction over the subject matter. 4. In the course of proceedings before the IAC, the assessee company raised objection against the contemplated action under s. 104 of the Act. The assessee company contended, that the company was a company in which the public are/were substantially interested that s. 104 of the Act was not applicable on the facts of the assessee company's case. In support of its contentions, the assessee-company filed a list of shareholders as on 31st March, 1973. 5. The assessee-company was directed by the ITO to produce the share register. The ITO found out that the list of shareholders filed by the assessee company before the IAC was not correct. Inasmuch as in the list filed by the assessee company with the IAC the name of one shareholder Smt. Jaidevi Padia was omitted while according to the share register produced by the assessee company before the ITO the said Smt. Jaidevi Padia was shown to be a shareholder holding 1000 shares as on 31st March, 1973. 6. The ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act were made applicable on the facts of the assessee's case and accordingly orders were made for both assessment years under appeal. 9. In appeal, it was contended on behalf of the assessee company, that more than 50 per cent of the shares were at no time during the relevant previous years controlled or held by five or less persons, as also, that the ITO was not justified in treating the assessee company as one in which the public were not substantially interested. Naturally, the assessee company agitated the levy of additional income-tax since levied upon the assessee-company under s. 104 of the Act. The assessee company also filed before the AAC details as to shares held by a group of persons, who could not be held to be members of public and according to these details, the holding of shares by the closely held company and the directors of the assessee-company accounted for 13,250 shares as on 31st March, 1973 and for 12,750 shares as on 31st March, 1974. 10. The AAC, after considering the facts of the case as also submissions made on behalf of the assessee company and relying upon the definition as is found out in s. 2(18)(b)(B)(d) of the Act and also relying upon the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see company showing that as on 31st March, 1973 and also as on 31st March, 1974 the number of shares issued and subscribed stood at 28,400. He also filed the lis of directors of the assessee company which shows the following persons as Directors— (1) Shri A. Padia (2) " G.S. Nevatia (3) " R. Khemka (4) " M.K. Loyalka (5) " G. M. Loyalka (6) " C.L. Kejriwal (7) " A.K. Himmatsingka Sri Thard has also placed on our file a copy of the agreement dt. 27th July, 1962 between the German concern on the one part and the assessee-company on the other part. He has also placed on our file a letter dt. 14th Jan., 1970, addressed by the German concern to the assessee-company, intimating the assessee company that the German concern liked to sell 1700 equity shares of Rs. 10 each back to the assessee company at the purchase price. Sri Thard has also placed on our file evidence to prove that the collaboration agreement fell through due to certain legal complications and due to delay on the part of the Government of India in granting the requisite permission. He has also placed on our file auditor's report to the shareholders of the assessee company, relating to the period end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercises in futility to discuss the factum of holding of shares of 1700 by the German firm as has been alleged the assessee company for considering the matter for the purposes of our decision for the asst. yr. 1973-74 inasmuch as the result of the discussion taken either way will be that the assessee fails and the orders of the lower authorities will stand. 16. As regards the asst. yr. 1974-75, the ITO has taken the total number of shares issued and subscribed at 26,700, while the assessee has claimed that the said number stood at 28,400. The lower authorities have reasoned that 1700 shares were allotted to a German concern, M/s Magnet Fabric Bon in pursuance of an agreement for the supply of technical know-how. Since the said agreement ultimately did not materialise and the share scripts were returned by the said German concern to the assessee company, the number of equity shares allotted to the shareholders were taken at 26,700. The lower authorities have in their orders, themselves admitted that the said shares i.e., 1700 shares in number were allotted to a German concern, M/s Magnet Fabric Bon and in view of this positive finding of fact in the orders, coupled with the evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the 1st day of the relevant previous year, lised in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder; (B)(i) shares in the company (not being shares entitled to 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 cl. (b) of s. 108 (hereafter in this clause referred to as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansferred to one Shri A. Padia as on 31st March, 1978. He also contended that according to his information, as on date the payment of the sale price realised has not been made over to M/s L.S. Davar Co. to whom the payment was meant to be made as per and under instructions of the German concern on the transfer of 1700 shares. 22. Since the said German concern vide its letter dt. 14th Jan., 1970 'sold back' its holding of shares numbering 1700 to the assessee company, by no stretch of imagination it can be said that the said German concern was holding beneficially the said shares numbering 1700 throughout the relevant previous years relevant to the assessment years under appeals. 23. The shares were all along, under the control of the company through its directors who were managing the affairs of the company as such, considering the totality of the facts and circumstances of the assessee's cases in appeals before us, we are of the opinion and do hold that the assessee company was not a company in which the public were substantially interested during the previous years relevant to the assessment years under appeal with the result that we do uphold the orders of the lower auth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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