COMMISSIONER OF INCOME TAX Vs. EMTICI ENGINEERING LTD.

JUDGEMENT

(1.) THIS reference at the instance of Revenue calls for consideration of question of law preferred in following terms: Whether the Tribunal is right in law and on facts in holding that the assessee should be treated as a public limited company?

(2.) THE concerned assessment year is 1985 -86. The case of the assessee is that the assessee company is the company in which the public are substantially interested as defined under Section 2(18) of the IT Act, 1961 ('Act' for short).

(3.) SECTION 2(18) of the Act insofar as the same is relevant for our purpose reads as follows: (18) 'company in which the public are substantially interested' - a company is said to be a company in which the public are substantially interested - (a) If it is a company owned by the Government or the RBI or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the RBI or a corporation owned by that bank; or) (aa) If it is a company which is registered under Section 25 of the Companies Act, 1956 (1 of 1956); or (ab) If it is a company having no share capital and if, having regard to its objects, the nature and composition of its membership and other relevant considerations, it is declared by order of the Board to be a company in which the public are substantially interested: Provided that such company shall be deemed to be a company in which the public are substantially interested only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration; or (ac) If it is a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under Section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi or mutual benefit society; or (b) If it is a company 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 last day of the relevant previous year, listed 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) 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) 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. Explanation - In its application to an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, item (B) shall have effect as if for the words 'not less than fifty per cent', the words 'not less than forty per cent' had been substituted;