COMMISSIONER OF INCOME TAX Vs. SUNDARAM CLAYTON LIMITED

JUDGEMENT

(1.) AT the instance of the Department, the Tribunal has referred the following questions for the opinion of this Court under s. 256(1) of the IT Act, 1961, for the asst. yrs. 1975-76 and 1979-80 :-

(2.) THE assessee is a company incorporated on 5th Oct., 1962 and carries on business in the manufacture of air compressor equipments for automobile vehicles. For the asst. yrs. 1975-76 and 1979-80, the accounting years ended on 31st May, 1974 and 31st May, 1978 respectively. THE assessee claimed its status as a company in which public are substantially interested for the reason that it satisfies all the conditions mentioned in s. 2(18)(b)(B) of the IT Act. THE ITO held that the first condition to be satisfied was that the company was not a private company as defined in s. 3(1)(iii) of the Companies Act, 1956, and the essential ingredients being present in the articles of association, the assessee-company was a private company. According to the ITO, when once the prior condition under s. 2(18)(b) of the Act was not satisfied, it was needless to look into the question whether all the other conditions mentioned in s. 2(18)(b)(B) of the Act were satisfied at all. THErefore, the ITO has adopted the status of the assessee as a company in which public were not substantially interested and consequently allowed weighted deduction under s. 35B only at one and one third times of the expenditure as against 1-1/2 times claimed by the assessee for these years. THEse questions came up for consideration in both the assessment years.

(3.) SO far as fourth question is concerned, it relates to asst. yr. 1979-80.