COMMISSIONER OF INCOME TAX Vs. SWADESHI MATCH CO

JUDGEMENT

(1.) THE question referred to us by the Income -tax Appellate Tribunal (Bombay Bench 'C') is as follows :

(2.) THE assessee is a non -resident company. We are concerned in this reference with the assessment year 1963 -64. In that year, the assessee had a total income of Rs. 35,46,510, which income included a sum of Rs. 26,06,484 which the assessee had received as dividend from two Indian companies, namely, the Western India Match Co. Ltd., (hereinafter referred to as 'WIMCO') and the Assam Match Co. Ltd. It was claimed that these two companies were subsidiaries of the assessee -company. The dividend received from WIMCO came to Rs. 21,94,800.

(3.) AGGRIEVED by this decision to allow super -tax rebate at the lesser rate of 30 per cent. the assessee moved the AAC. Before the AAC, relying upon the dictionary meaning of the word 'hold', it was submitted that even a beneficial owner of the shares would have to be regarded as the holder of shares within the meaning of Expln. II to the Finance Act. The matter had come up before the AAC also for the earlier assessment year 1962 -63, the AAC followed his decision in the earlier appeal and accepted the submission of the assessee that the shares could as well be held in the names of the nominees through whom control could be exercise. The AAC distinguished the word 'holds' occurring in Expln. II from the 'holder of shares' or 'shareholder', the AAC also referred to s. 4 of the Companies Act, 1956, and observed that the provisions of the said Expln. II were more or less copies from s. 4 of the Companies Act. The AAC, therefore, upheld the appeal and directed the ITO to give rebate at the higher rate, namely, 50 per cent.