COMMISSIONER OF INCOME TAX vs KUSUM PRODUCTS LTD.

SUHAS CHANDRA SEN, J. :

The Tribunal has referred the following questions of law to this Court under s. 256(2) of the IT Act, 1961 :

"(1) Whether on the facts and in the circumstances of the case the Tribunal is right in law in arriving at the finding that the assessee company is not a closely held company and whether such finding is otherwise unreasonable and/or perverse ?

(2) Whether on the facts and in circumstances of the case the Tribunal relied upon irrelevant and partly irrelevant materials and ignored relevant materials in coming to its finding that the assessee company is a company in which the public are substantially interested ?"

The assessment year involved is 1967-68 for which the relevant accounting period ended on 31st March, 1967.

The Tribunal has taken note of the fact that out of 80,000 ordinary shares, 50,000 shares were held by public limited companies. The shares were also quoted in the Calcutta Stock Exchange. The AAC had noted the name of different companies which were holding 50,000 shares.

The Tribunal held that the onus was on the department to prove that the company was a closely-held company. The Tribunal held that sufficient material had not been brought on record by the department for holding the assessee company to be a closely-held company. It was held as follows :

"According to the Tribunal it was a public company and there was no evidence of any concerted action by any group of shareholders who would be treated as one unit on one block of controlling interest. The Tribunal held that the shares were found to be quoted and no material had been brought to show that they were not freely transferable. The Tribunal referred to the orders of the AAC in the case of M/s. Produce & Shares Northern Ltd. and M/s. Rajasthan Industries Ltd. and held that they were widely held companies. In view of the above the Tribunal held that the assessee was a company in which the public were substantially interested".

The Tribunal has given the facts on the basis of which it had come to the conclusion that the assessee company could not be recorded as a closely-held company. It cannot be said that finding of the Tribunal was perverse.

Under these circumstances the first question is answered in the following manner :

The Tribunals decision is not perverse and the Tribunal was right in coming to its decision.

The second question is answered in the negative and in favour of the assessee.

There will be no order as to costs.

BHAGABATI PRASAD BANEREE, J. :

I agree.