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Indian Steel & Wire Products Ltd. v. Commissioner Of Income-Tax, West Bengal.
Structured Summary of the Opinion (G.K. Mitter, J.)
Factual and Procedural Background
This reference arises under section 66(1) of the Income-tax Act. Two questions were referred to the Court concerning (1) whether the assessee-company was one in which the public were substantially interested within the meaning of the Explanation to sub-section (9) of section 23A of the Income-tax Act as it then stood, and (2) whether the amendments to section 23A in 1955 violated fundamental rights under the Constitution and were therefore ultra vires.
Facts stated in the reference (as set out in the statement of the case): the assessee was a public limited company engaged in manufacture or processing of goods. Of the total issued shares, 322,000 ordinary shares of Rs.10 were fully paid and 26,580 shares of Rs.10 were paid up to Re.1 each. Major shareholdings included M/s Indra Singh & Sons Private Ltd. (managing agents) holding 192,945 shares (represented by nominee director J.C. Mukherjee), Sir Indra Singh (575), Sardar Ajaib Singh (510), and P.C. Mustafi (500). For assessment year 1955-56 the company's total income and tax were determined and dividends declared were 25.8% of distributable profits; for 1956-57 dividends declared were about 20%.
The Income-tax Officer held that, after the 1955 amendment, section 23A(1) applied to the assessee (proviso/ clause (b) of the Explanation to sub-section (9)), concluding shortfalls in dividend distribution for the two years and levying super-tax under section 23A(1). The assessee's contention that it was a company in which the public were substantially interested was rejected by the Income-tax Officer and on appeal by the Appellate Assistant Commissioner and the Tribunal.
Legal Issues Presented
- Whether, on the facts and in the circumstances of the case, the assessee-company is one in which the public are substantially interested within the meaning of the Explanation to sub-section (9) of section 23A of the Income-tax Act as it stood at the relevant time?
- Whether, on the facts and in the circumstances of the case, the provisions of section 23A as amended in 1955 violated the fundamental rights guaranteed by the Constitution and, as such, were ultra vires the Constitution?
Arguments of the Parties
Contentions advanced on behalf of the assessee
- The assessee contended before the Tribunal that the four conditions formulated by the Tribunal (derived from the Explanation to sub-section (9) of section 23A) were not cumulative but alternative, so that satisfying one would suffice.
- The assessee argued that the word “public” must include directors, which, if accepted, would satisfy the third condition regarding the public holding the requisite percentage of shares.
- It was contended (by Shri Banerjee for the assessee) that the word “or” appearing in sub-clause (iii) made the two branches therein disjunctive, so that satisfying either branch (control by not less than six persons, or holding by not less than six persons of the requisite voting power) would suffice.
- On the constitutionality point, the assessee argued there was no rational basis for fixing the specified percentages of shareholding and the number six as the threshold for persons controlling the affairs of a company.
Contentions advanced by the Revenue / Income-tax Officer and Tribunal
- The Income-tax Officer, Appellate Assistant Commissioner and the Tribunal treated the conditions derived from the Explanation as cumulative and required all conditions to be satisfied for a company to be outside the mischief of section 23A.
- The Income-tax Officer analysed shareholdings (excluding the private company Indra Singh & Sons Pvt. Ltd. and director holdings) and found that public shareholders held only 128,128 shares which was less than the required 40% threshold for a manufacturing company; thus the third condition failed.
- The Income-tax Officer also held that more than 60% of voting power was in the hands of four persons (the private managing agent company plus three directors), so the fourth condition (sub-clause (iii)) was not satisfied because not less than six persons did not control the affairs or hold the requisite voting power.
- The Tribunal concurred with the view that all enumerated conditions were cumulative and concluded that the fourth condition was not satisfied in the assessee's case.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Mehta Parikh & Co. v. Commissioner Of Income Tax, Bombay [1956] 30 I.T.R. 181; [1956] S.C.R. 626 | That if a case contains anything ex facie which is bad in law and which bears upon the determination, it is erroneous in law (court relied on Edwards v. Bairstow via this case). | The Court noted the Mehta Parikh authority but held that the principle in Mehta Parikh did not assist the assessee here because the Court did not find that the Tribunal misinterpreted the section; had the Tribunal misread the conditions as cumulative when they were disjunctive, Mehta Parikh would have required remand, but that was not the situation. |
| Edwards v. Bairstow [1955] 28 I.T.R. 579 H.L. | Observation (as relied on in Mehta Parikh) that an order containing something bad in law ex facie is erroneous in point of law. | Referenced through Mehta Parikh; used to indicate the standard under which a Tribunal's decision may be reversed for legal error. The Court concluded this standard did not compel interference in the present case. |
| Homi Jehangir Gheesta v. Commissioner Of Income Tax, Bombay [1961] 41 I.T.R. 135; [1961] 1 S.C.R. 770 | That one must read a Tribunal's order as a whole to determine whether material facts for and against the assessee have been considered and whether the conclusion is fairly reached without irrelevant considerations. | The Court stated this principle but held that the cited case did not help the assessee here; the Court did not find that the Tribunal failed to consider material facts as required by this precedent in reaching its conclusion on the cumulative nature of the conditions. |
| Sardar Ajaib Singh v. Commissioner of Income-tax (Income-tax Reference No. 123 of 1961) | Consideration of the constitutionality of section 23A; the earlier reference dealt with whether section 23A was confiscatory or violated Articles 14, 19(1)(f) and (g) and 265. | The Court stated that it had already considered this matter in that earlier reference and for the reasons given there concluded that section 23A is neither confiscatory nor in violation of the cited constitutional provisions; the Court applied that conclusion in answering the constitutional question in the present reference. |
Court's Reasoning and Analysis
The Court undertook a textual and purposive construction of the Explanation to sub-section (9) of section 23A. It set out the Explanation's conditions and then restated them in a structured manner applicable to a company engaged in manufacture or processing of goods (where specified percentage thresholds differ):
- The Court identified the condition sets: (1) government ownership (or 40% government holding), or (2) company not private and three sub-conditions (i), (ii), (iii) that concern public holding of a specified proportion of voting power, dealing or free transferability of shares, and control/holding by not less than six persons.
- On construction, the Court concluded that the sub-clauses (i), (ii) and (iii) in clause (b) are cumulative rather than alternative. The absence of the word "and" between sub-clauses (i) and (ii) did not render them disjunctive; the Court illustrated that conjunctive sense may be conveyed without repeating the conjunction before each item.
- Regarding sub-clause (iii) the Court analysed its internal structure. It observed that sub-clause (iii) effectively imposes two distinct and separate requirements joined to the main clause by the conjunctive sense (the Court recast the clause into two alternative formulations each beginning with "if it is not a private company ... and ..."): (a) the affairs of the company were at no time during the previous year controlled by less than six persons; and (b) shares carrying the requisite percentage of voting power were at no time during the previous year held by less than six persons. The Court construed the clause so that both branches must be satisfied (i.e., not less than six persons should both control the affairs and hold the requisite percentage of voting power) in order to qualify as a company in which the public are substantially interested.
- Applying the statutory test to the facts, the Tribunal and the Revenue had found that, after excluding the private managing agents and director holdings, the public did not hold the requisite 40% of voting power (for manufacturing company rules) and that more than 60% of the total voting power was held by four persons (the private managing company plus three individuals), i.e., less than six persons controlled the affairs or held the relevant voting power. The Court agreed with the Tribunal that the fourth condition (sub-clause (iii)) was not satisfied. Given this finding, the Court considered it unnecessary to decide the third condition in detail.
- On the constitutional challenge, the Court referred to its earlier treatment of section 23A in Sardar Ajaib Singh v. Commissioner of Income-tax, where it had concluded that section 23A was not confiscatory and did not violate Articles 14, 19(1)(f) and (g) and 265. The Court here additionally addressed the argument that there was no rational basis for the specific percentage thresholds and the number "six". The Court rejected that contention, explaining the legislature's apparent rationale: 50% public holding normally prevents a small coterie from controlling the company; trading or free transferability further prevents entrenchment; the six-person threshold was judged by the legislature to be a reasonable safeguard against a very small number controlling a company; the reduction from 50% to 40% for manufacturing companies indicated a legislative preference to foster industrial growth; and 40% government holding was considered sufficient to rule out the mischief because of governmental influence. The Court therefore found no arbitrariness in the legislative choices as challenged under Article 14.
Holding and Implications
Holding: The Court answered both referred questions in the negative.
Consequence and immediate effect:
- The Court held that, on the facts and as a matter of law, the assessee-company was not a company in which the public were substantially interested within the meaning of the Explanation to sub-section (9) of section 23A; accordingly the provisions of section 23A(1) applied to the assessee as determined below the appellate process, and the orders levying super-tax stood against the assessee.
- On the constitutional challenge the Court held that the 1955 amendment to section 23A did not violate Articles 14, 19(1)(f) and (g) or Article 265 and was not confiscatory; consequently the challenge to the statute failed.
- The assessee was ordered to pay the costs of the reference.
Wider implications:
The opinion applies statutory construction rules to the Explanation to sub-section (9) of section 23A and endorses a cumulative reading of its conditions in the circumstances presented; however, the Court did not indicate that it was laying down a novel precedent on constitutional grounds beyond affirming the reasoning of the earlier reference (Sardar Ajaib Singh). No new constitutional principle or departure from existing precedent was announced beyond the Court's application of prior reasoning. The direct legal effect is confined to the parties: the Court answered the reference against the assessee and upheld the application of section 23A in the case before it.
This summary is limited to the information contained in the provided opinion and does not add or infer facts or legal content beyond that text.
G.K Mitter, J.:— The questions referred to this court under section 66(1) of the Income-tax Act are as follows:
“(1) Whether, on the facts and in the circumstances of the case, the assessee-company is one in which the public are substantially interested within the meaning of the Explanation to sub-section (9) of section 23A of the Income-tax Act as it stood at the relevant time?
(2) Whether, on the facts and in the circumstances of the case, the provisions of section 23A as amended in 1955 violated the fundamental rights guaranteed by the Constitution and, as such, ultra vires the Constitution.”
2. The facts appearing in the statement of the case are as follows:
The assessee is a public limited company engaged in the manufacture or processing of goods. Out of a total number of shares issued by the company, 3,22,000 ordinary shares of Rs. 10 each were fully paid up and the balance of 26,580 shares of Rs. 10 each was paid up to the extent of Re. 1 per share only. The shareholding of the managing agents and directors were as follows:
Shares (1) M/s. Indra Singh & Sons Private Ltd., managing agents (represented on the board by its nominee, J. C. Mukherjee) … 1,92,945 (2) Sir Indra Singh (a director) … 575 (3) Sardar Ajaib Singh (a director) (Ordy. shares) 510 1,94,030
3. Besides the above, one P.C Mustafi held 500 shares and was also a director of the company. At the assessment stage and before the appellate authorities, he was considered to be a director during the two relevant accounting periods and this fact was not challenged. For the assessment year 1955-56 the company was assessed on a total income of Rs. 66,17,507; the tax liability thereon amounted to Rs. 28,74,484. Although the balance available for distribution as dividends came to Rs. 37,43,023.the company at its general meeting held on December 29, 1955, declared dividends to the extent of Rs. 9,67,974 which worked out to 25.8% of the distributable profits.
4. For the assessment year 1956-57, the total income was determined at Rs. 88,50,164, the tax liability being determined at Rs. 39,55,170. Out of the balance of Rs. 48,94,994 available for distribution, the company in the general meeting held on July 22, 1957, declared; dividends to the extent of Rs. 9,67,974 which came to about 20% of the distributable profits. The Income-tax Officer held that the assessee-company came within the mischief of clause (b) of the proviso to sub-section (1) of section 23A as it stood at the relevant time (after the amendment in 1955) and, consequently, there was a shortfall in the distribution of dividends for the year 1955-56, amounting to Rs. 27,75,049 and for the year 1956-57, Rs. 39,97,020. After due notice to the company and with the previous approval of the Inspecting Assistant Commissioner, the Income-tax Officer passed orders under section 23A(1) levying a super-tax of Rs. 6,93,763 for the first year and Rs. 9,81,755 for the second year under consideration. The contention of the assessee that it was a company in which the public were substantially interested within the meaning of the Explanation to sub-section (9) of section 23A was rejected.
5. There is no dispute that the dividends distributed by the company were not such as to exclude the applicability of section 23A(1). Subsection (9) of the section provided that it was not to apply to any company in which the public were substantially interested. The Explanation to the sub-section ran as follows:
“For the purposes of this section, a company shall be deemed to be a company in which the public are substantially interested—
(a) if it is a company owned by the Government or in which not less than forty per cent, of the shares are held by the Government;
(b) if it is not a private company as defined in the Indian Companies Act, 1913 (VII of 1913), 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 previous year beneficially held by the public (not including a company to which the provisions of this sub-section apply):
Provided that in the case of any such company as is referred to in subsection (4) this sub-clause shall apply as if for the words ‘not less than fifty per cent.’, the words ‘not less than forty per cent.’ had been substituted;
(ii) the said shares were at any time during the previous year the subject of dealings in any recognised stock exchange in India or were freely transferable by the holder to other members of the public; and
(iii) the affairs of the company or the shares carrying more than fifty per cent, of the total voting power were at no time during the previous year controlled or held by less than six persons (persons who are related to one another as husband, wife, lineal ascendant or descendant, brother or sister, as the case may be, being treated as a single person and persons who are nominees of another person together with that other person being likewise treated as a single person):
Provided that in the case of any such company as is referred to in sub-section (4), this clause shall apply as if for the words ‘more than fifty per cent.’, the words ‘more than sixty per cent.’ had been substituted.”
6. It appears to me that a company is to be treated as one in which the public are substantially interested if—
(1) it is a company owned by the Government or in which not less than. 40°/o of the shares are held by the Government, or
(2) it is not a private company as defined in the Indian Companies Act, and
(i) its shares carrying not less than 50% of the voting power have been allotted unconditionally to or acquired unconditionally by and were throughout the previous year beneficially held by the public provided that in the case of a company engaged in the manufacturing or processing of goods, etc., the words “not less than 50%” are to be replaced by the words “not less than 40%”,
(ii) the shares of the company were at any time during the previous, year the subject of dealings in any recognised stock exchange in India
the shares were freely transferable by the holder to other members of the public
(iii) not less than six persons controlled the affairs of the company or held shares carrying more than 50% of the total voting power during the previous year. Provided that in the case of a company engaged in the manufacturing or processing of goods, the words “fifty per cent.” shall be replaced by the words “sixty per cent.” In computing six persons, those who are related to one another as husband, wife, lineal ascendant or descendant, brother or sister, as the case may be, are to be treated as a single person and persons who are nominees of another person together with that other person shall be treated as a single person.
7. Inasmuch as the assessee was engaged in the manufacture or processing of goods, the Tribunal held that before it could establish that it was a company in which the public were substantially interested within the meaning of section 23A, it had to fulfil the following four conditions, viz.:
(1) It was not a private company as defined under the Indian Companies Act;
(2) Its shares at any time during the previous year—
(a) were the subject of dealings in any recognised stock exchange, or
(b) were freely transferable to other members of the public;
(3) Its shares carrying not less than 40% of the voting power—
(a) have been allotted or acquired unconditionally, and
(b) were throughout the previous year held by the public,
(4) (a) the affairs of the company were at no time during the previous year controlled by less than six persons, or
(b) the shares carrying more than sixty per cent, of the total voting power at no time held by less than six persons.
8. It would therefore appear that the Tribunal correctly appreciated the law on this point. According to the Tribunal all the above conditions were cumulative and not alternative and all of them had to be satisfied before a company could stand out of the mischief of section 23A. The Income-tax Officer as well as the Appellate Assistant Commissioner and the Tribunal were of the view that the first and the second conditions had been satisfied. With regard to the third condition the Income-tax Officer's opinion noted by the Tribunal was to the following effect: The assessee being engaged in the manufacture or processing of goods, sub-section (4) of section 23A is applicable. One has therefore got to see whether the shares of the assessee carrying not less than forty per cent, of the voting power have been allotted unconditionally to the members of the public. “Public” is not to include a company to which the provision of section 23A applies. In this case such a company, i.e, Indra Singh & Sons Private Limited, who are managing agents of the assessee-company, held 1,95,945 shares out of a total of 3,22,659 shares and are represented on the board of directors by their nominee director, J.C Mukherjee. Forty per cent of the total number of shares comes to 1,29,064 shares and it is to be seen whether members of the public, excluding Indra Singh & Sons Private Ltd., held at least this number of shares. Apart from 1,92,945 shares held by the private company, a total of 1,585 shares are held by Sir Indra Singh and Sri P.C Mustafi and Sardar Ajaib Singh who were directors of the company at one time or other in the course of the previous year under consideration. Thus, excluding the shares of the private company and the directors, the shares available to the public were only 1,28,128 which is less than 40%.
9. According to the Income-tax Officer the fourth condition too was not satisfied. According to him it had to be found out whether the affairs of the company or its shares carrying more than 60% of the total voting power were throughout the previous year controlled or held by not less than six persons. If less than six persons exercised control, then the provisions of section 23A would be attracted. Again, it was to be seen whether the shares carrying more than 60% of the total voting power were at any time during the accounting period under consideration held by less than six persons: if such a percentage of shares was so held, then the company came within the mischief of section 23A. The private company, Messrs. Indra Singh & Sons Private Ltd., was a person within the definition given in section 3(42) of the General Clauses Act. This person along with Sir Indra Singh, Sardar Ajaib Singh and P.C Mustafi held 1,94,530 shares which was more than 60% of the total voting power of 3,22,658 shares. As more than 60% of the total voting power was in the hands of four persons, the fourth condition was not satisfied.
10. Before the Tribunal it was contended on behalf of the assessee that the four conditions were not cumulative, that the word “public” must include directors so that the third condition was satisfied by the assessee and the fourth condition had two alternatives and, if either of these two was satisfied, the condition as a whole was fulfilled.
11. The Tribunal found itself unable to hold that the conditions were not cumulative. The Tribunal did not consider whether the third condition was fulfilled and came to the conclusion that the fourth condition had not been satisfied.
12. In my opinion, the Tribunal was right in its conclusion that the four conditions enumerated by it were cumulative and not alternative. The Explanation to sub-section (9) does not, in my opinion, make the subclauses (i), (ii) and (iii) of clause (b) disjunctive. It is true that the word “and” does not appear in between sub-clause (1) and sub-clause (ii). In my opinion that does not matter. For instance, when we want to convey the impression that three persons, namely, A, B, C, together do not own three lakhs of rupees, we express ourselves correctly when we say A, B and C “do not own three lakhs of rupees”. We do not have to say A and B and C do not own three lakhs of rupees.
13. If the conditions are cumulative and if one of them has not been fulfilled, the mischief of section 23A(1) would come into play. Regarding the fourth condition, the Tribunal observed “from the position of the shareholding described in paragraph 8 above (which is the same as that quoted earlier in the judgment taking into consideration the shares held by P.O Mustafi) it is clear that the following four persons, i.e, Messrs. Indra Singh & Sons (P.) Limited, Sir Indra Singh, Sardar Ajaib Singh and Sri P.C Mustafi themselves held more than 60% of the total voting power…” It is however contended by Shri Banerjee appearing on behalf of the assessee-company that the word “or” occurring after the words “the affairs of the company” in the first line and the word “or” occurring in the fourth line after the words “during the previous year controlled” in sub-clause (iii) are disjunctive and not conjunctive, with the result that if the affairs of the company are controlled by not less than six persons, then the company satisfies the condition of a company in which the public are substantially interested. Here again, we think the assessee-company's contention cannot be accepted. Sub-clause (iii) is divided into two parts, the first relating to the affairs of the company being controlled by not less than six persons and the second part relating to the holding of shares carrying more than 60% of the total voting power by not less than six persons. Since both these parts are joined with the main part of clause (b) by the use of the conjunctive word “and”, the proper construction of sub-clause (iii) would be as follows:
(1) if it is not a private company as defined in the Indian Companies Act, 1913, and the affairs of the company were at no time during the previous year controlled by less than six persons;
(2) if it is not a private company as defined in the Indian Companies Act, 1913, and the shares carrying more than 60% of the total voting power were at no time during the previous year held by less than six persons.
14. Thus analysed sub-clause (iii) seeks to impose two distinct and separate conditions, viz., (1) control of the affairs of the company, and (2) requisite percentage of the voting power held by virtue of the holding of shares. So, in order that a company may be treated as a company in which the public are substantially interested, it has to show that not merely its affairs are controlled by not less than six persons, but also that 50% or 60% as the case may be of the total voting power is also held by not less than six persons.
15. In my opinion, the Tribunal correctly appreciated the effect of subclause (iii) of clause (b). Earlier in this judgment I have recast the section in a different way. As indicated by me above, sub-clause (iii) is aimed at enforcing that not less than six persons should control the affairs of the company or hold shares carrying more than 60% of the total voting power during the previous year. In other words, we have got to analyse the shareholding as also examine the control of the affairs of the company during the previous year and find out whether less than six persons were in control or less than six persons held shares carrying more than 60% of the voting power. Judged in this light, the condition prescribed in subclause (iii) would not be satisfied by mere compliance with one branch of it. Both branches, namely, the control of the affairs by not less than six persons and the holding of shares carrying 60% of the total voting power by not less than six persons would have to be fulfilled.
16. In the view taken by us with regard to the fourth condition regarding sub-clause (iii) of clause (b), it is unnecessary to examine the applicability of the third condition which the Tribunal did not apply. Our attention was drawn to the judgment of the Supreme Court in Mehta Parikh & Co. v. Commissioner Of Income Tax, Bombay [1956] 30 I.T.R 181; [1956] S.C.R 626., where the court had relied on the observations of the House of Lords in Edwards v. Bairstow [1955] 28 I.T.R 579 H.L., “if the case contains anything ex facie which is bad in law and which bears upon the determination, it is obviously erroneous in point of law”. Our attention was also drawn to a judgment of the Supreme Court in Homi Jehangir Gheesta v. Commissioner Of Income Tax, Bombay [1961] 41 I.T.R 135; [1961] 1 S.C.R 770., where that court had observed (page 141): “We must read the order of the Tribunal as a whole to determine whether every material fact, for and against the assessee, has been considered, fairly and with due care; whether evidence pro and con has been considered in reaching the final conclusion; and whether the conclusion reached by the Tribunal has been coloured by irrelevant considerations or matters of prejudice.” In my opinion, these cases do not help the assessee before us. If we had come to the conclusion that conditions 3 and 4 formulated by the Tribunal were not cumulative but disjunctive, we would be bound to hold that the Tribunal had gone wrong on a point of law by misinterpreting the section and send the matter back for recording its finding on condition 3. That however is not the case here.
17. So far as the unconstitutionality of section 23A is concerned, we have already dealt with the question at some length in Sardar Ajaib Singh v. Commissioner of Income-tax (Income-tax Reference No. 123 of 1961) and for the reasons given we have come to the conclusion that section 23A is neither confiscatory in character nor does it violate articles 14, 19(1)(f) and (g) and 265 of the Constitution.
18. With regard to article 14 of the Constitution, a further point not raised in Income-tax Reference No. 123 of 1961 was put forward in this case. This was to the effect that there was no rational basis for fixing the percentages of shareholding in the company which would give a clue to the test as to when the public could be said to be substantially interested in it. In my opinion, the contention is not sound. Normally if 50 per cent, of the shares are held by the public, a group of shareholders holding the balance of the shares cannot control the company. The scheme of the Explanation to sub-section (9) of the section seems to be as follows: If the company is not a private limited company and if its shares carrying not less than 50% of the voting power have been allotted unconditionally to or acquired unconditionally by and were throughout the previous year held by the public, that would be a good ground for holding that a small coterie of shareholders were not in full control of the company. The legislature was not content to say that the company should be judged only by the shareholding. It further provided that the shares of the company should have been dealt with in any recognised stock exchange in the previous year or the conditions of transferability were such that there was no impediment to free transfer. The third condition was that the affairs of the company should not have been controlled by less than six persons and the shares carrying more than 50% of the voting power were held by not less than six persons. It was argued that there was no rational basis for fixing the number of persons at six. I do not agree. The legislature in its wisdom thought that six was a sufficiently large but not an unwieldy number to control the affairs of the company. Usually a company does not have more than six to eight directors as it is well known that the presence of a large number of directors does not help the proper management of the affairs of the company. The provision that not less than six persons should hold more than 50% of the total voting power was an additional safeguard against a very small number of persons controlling the company. The fact that the shareholding of 50% by the public was reduced to 40% in the case of a company engaged in the manufacture or processing of goods only shows that the legislature was stretching a point to foster industries and develop industrial growth in the country. The legislature was further of opinion that even if only 40% of the shares were held by the Government, the mischief of withholding distribution of dividends was not likely to occur in view of the Government's influential position. Thus it will be noticed that there is no arbitrariness behind the fixing of the percentages of shareholding mentioned in the Explanation to sub-section (9) of section 23A.
19. In the result, the answers to both the questions are in the negative and against the assessee who will pay the costs of this reference.
Masud, J.:— I agree.
20. Questions answered in the negative.
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