Bombay H.C : Whether, on the facts and in the circumstances of the case, the assessee-company was a company in which the public were substantially interested during the previous years relevant to the asst. yrs. 1966-67 to 1969-70 ?

Counsel Appeared

G.J. Jetly,with Mrs. Singh, for the Revenue : S.J. Mehta, S.P. Mehta & I.M. Munim, for the Assessee

SUGLA, J.:

The questions of law referred to us in this reference at the instance of the Revenue are :

“(1) Whether, on the facts and in the circumstances of the case, the assessee-company was a company in which the public were substantially interested during the previous years relevant to the asst. yrs. 1966-67 to 1969-70 ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the value of ‘building and machinery under erection’ and ‘ advance for purchase of machinery and raw material ‘ should be included in the capital base under r. 19A for the purpose of working out the relief under s. 80J of the IT Act, 1961, for the asst. yrs. 1967-68 to 1969-70 ? “

It is common ground that the Tribunal has followed its earlier orders for the asst. yrs. 1964-65 and 1965-66 for deciding the above two questions in favour of the assessee and though the Revenue had come up in reference against the said earlier orders of the Tribunal, the reference was not pressed and, therefore, the questions were not answered. However, Shri Jetly, learned counsel for the Department, submits that his instructions in the present case are to press the reference. In this context, he invites our attention to s. 2(18)(b)(B) (iii) and Expln.1 thereto of the IT Act, 1961, for the proposition that for the purpose of finding whether shares carrying more than 50 per cent of the total voting power were held by five or less persons, the persons who are nominees of any other person shall be treated as a single person. It was stated that the United Commercial Bank and the Central Bank are shareholders of the assessee-company as nominees of Hindustan Charity Trust and, therefore, are to be treated as one single person. If that is done, he argued, more than 50 per cent shares of the said company would be found to be held by less than five persons. Shri Mehta, learned counsel for the assesseecompany, on the other hand, relied upon the Supreme Court’s decision in the cases of Howrah Trading Co. Ltd. vs. CIT (1959) 36 ITR 215 (SC) and CIT vs. Shakuntala (1961) 43 ITR 352 (SC), for the proposition that while counting the number of shareholders, it is the number of registered shareholders which matters.

The short point that requires consideration in this reference thus is whether the shares held by the two banks are to be treated as shares held by one person or two persons. The registered shareholders are the two banks in their own right. It is true that both the banks are nominees of Hindustan Charity Trust. However, the Tribunal has given a clearcut finding that they have never acted in concert and unison and they are the registered shareholders. In the above view of the matter, following the Supreme Court decisions, we hold that the two banks are to be treated as two persons and not as one single person as contended by the Revenue. Accordingly, the first question of law is answered in the affirmative and in favour of the assessee.

As regards the second question, both the parties agree that the issue is squarely covered by this Court’s decision in the assessee’s own case CIT vs. Alcock Ashdown & Co. Ltd.(1979) 8 CTR (Bom) 223: (1979) 119 ITR 164(AP) and the question is to be answered in the affirmative and in favour of the assessee. The second question is, therefore, answered accordingly.

6. In the result, both the questions of law are answered in the affirmative and in favour of the assessee with no order as to costs.

[Citation : 169 ITR 562]