| Case ID |
323b90e8-1394-49c1-b5bd-76efc850b0a2 |
| Body |
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| Case Number |
CIVIL APPEAL No. 599 OF 1961 |
| Decision Date |
Sep 17, 1962 |
| Hearing Date |
|
| Decision |
The Supreme Court held that the Income Tax Officer (ITO) was competent to pass an order under section 23A(1) after having allowed a rebate of one anna for rupee in assessment under the Finance Act, 1948. The Court emphasized that section 23A is not applicable to companies in which the public are substantially interested, defined as a minimum of 25% of the voting power held unconditionally and beneficially by the public. The Court clarified that the directors, even if they hold shares, do not automatically fall outside the definition of 'public'. The case established that if managing agents or a group holding shares collectively exceeds the 75% limit, they cannot be considered part of the public for the purposes of section 23A, thus affecting the company’s distribution of dividends. The decision favored the revenue, reversing the findings of the lower courts. |
| Summary |
In the landmark case of Commissioner of Income Tax v. Jubilee Mills Ltd, the Supreme Court of India addressed the interpretation of section 23A of the Income Tax Act, 1922, and its application to companies regarding undistributed profits. The case revolved around whether the Income Tax Officer was justified in applying section 23A after granting a rebate. The Supreme Court clarified that a company must be deemed as having public interest if at least 25% of the voting shares are held by the public unconditionally. The ruling emphasized that directors can be part of the public unless they collectively control more than 75% of the shares, which would classify the company as privately controlled. This case is pivotal for understanding corporate governance and tax implications in India, setting a precedent for how voting power and public interest are evaluated in tax law. |
| Court |
Supreme Court of India
|
| Entities Involved |
Jubilee Mills Ltd,
MM & Co.,
G. & Co. Ltd.
|
| Judges |
J.L. Kapur,
A.K. Sarkar,
M. Hidayatullah
|
| Lawyers |
R. Ganapathy Iyer,
R.N. Sachthey,
A.V. Viswanatha Sastri,
I.N. Shroff
|
| Petitioners |
Commissioner of INCOME TAX
|
| Respondents |
Jubilee Mills Ltd
|
| Citations |
1963 SLD 243,
(1963) 48 ITR 9,
(1963) 7 TAX 247
|
| Other Citations |
Raghuvanshi Mills Ltd. v. CIT [1961] 41 ITR 613 (SC),
Jubilee Mills Ltd. v. CIT [1958] 34 ITR 30 (Bom.),
CIT v. Bjordal [1955] 28 ITR 25 (PC),
Raghuvanshi Mills Ltd. v. CIT [1953] 24 ITR 338 (Bom.),
Shree Changdeo Sugar Mills Ltd. v. CIT [1961] 41 ITR 667 (SC),
Thomas Fattorini (Lancashire) Ltd. v. IRC [1943] 11 ITR (Suppl.) 50 (SC)
|
| Laws Involved |
Income Tax Act, 1922,
Income-tax Act, 1961
|
| Sections |
23A(1),
104
|