JUDGMENT
Kania, J.
1. Only one question has been referred to us for determination in this reference under section 256(1) of the Income-tax Act, 1961. That question runs as follows :
“Whether, on the facts and in the circumstances of the case, Indo-Nippon Chemical Co. Ltd. was a company in which the public were substantially interested within the meaning of section 2(18) of the Income-tax Act, 1961, in the years under reference ?”
2. Although the statement of the case is somewhat long, the relevant facts are very few. The assessee company was incorporated in 1960 for manufacturing plasticizers in collaboration with Nichimen & Co. of Osaka, Japan, which we propose to refer to hereafter as “the Japanese company”. By April 1, 1964, the assessee company had issued 27,000 shares at cost price. Eight thousand three hundred and forty-four of these shares were held by a private limited company and 9,900 of these shares were held by the Japanese company. The remaining shareholdings were relatively small. There were 18 shareholders in all. Article 53 of the articles of association of the assessee conferred absolute and uncontrolled discretion on the board of directors to decline to register a transfer of shares but provided that in case of such refusal, the board of directors must give intimation of refusal within two months to the transferee and the transferor. In respect of the previous year relevant to the assessment year 1964-65, a question arose whether the assessee was a company in which the public were substantially interested. The assessee urged that it was such a company and the Revenue asserted that it was not. It was found, inter alia, by the Tribunal that the Japanese company was a company in which the public were substantially interested as per the certificate of the auditors of the company. That certificate had not been called in question until the hearing of the appeal by the Tribunal and the Tribunal did not permit the Revenue to question the correctness of that certificate before it. On these facts, the Tribunal came to the conclusion that the Japanese company was a company in which the public were substantially interested within the meaning of section 2(18) of the Income-tax Act, 1961. It is from this decision of the Tribunal that the aforesaid question has been refer all proceedings. However, it is obvious from the facts stated he assessee has not co-operated in the payment of taxes.” all the conditions for waiver of penalty and interest are terest are est are nd hence he rejected the petition. hence he rejected the petition. t, 1961, deals with power to reduce 1961, deals with power to reduce r this section, the Commissioner duce or waive, iause (b) of section 108 (hereinafter in this clause referred to as the subsidiary company), or
(d) the public (not being a director, or a company to which this clause does not apply).”
3. Two submissions were made by Mr. Jetly. The first submission was that in view of article 53 of the articles of association of the assessee, to which we have referred earlier, it cannot be said that the shares of the assessee were freely transferable. This argument is negatived by a decision of the Supreme Court in Shree Krishna Agency Ltd. v. CIT . In that case, the relevant article, being article 37, regarding the right of the directors to refuse to register the transfer of shares was worded similar to article 53 of the articles of association of the assessee-company. It was held by the Supreme Court that in the absence of evidence to show that the directors had been exercising their power under article 37 freely and virtually eliminated the element of free transferability of the shagraphs of his order. The his order deal with (1) the assessee’s failure to pay to the notice of demand dated June 15, 1974, (2) the tax as per the estimate, (3) delay in filing the return, rt of the self-assessment tax, and (5) delay in payment n of the self-assessment tax. It was precisely on account of ys that interest and penalty were sought to be levied. Hence, oner filed a pee ecovery of the balance of Rs. 9,634-12-0. The very of the balance of Rs. 9,634-12-0. The thereupon signed a certificate under the Bengal Public ry Act of 1913 for the recovery of the said amount. case was being proceeded with, the original assessment l by a sum of Rs. 4,521 by an appellate order On November 11, 1957, the Income-tax Officer der section 29 of the Act directing payment ested. The only argument of Mr. Jetly was that it was the Japanese public who were shareholders of the Japanese company and not the Indian public. We see no reason why the meaning of the term “pub]ic” should be curtailed in the manner suggested by Mr. Jetly. We are not called upon to consider whether the Japanese shareholders of the Japanese company were Indian citizens or not but whether they were members of the public and we see no reason why they should not be regarded as members of the public. There is no warrant or reason whatever suggested to us why the qualification “Indian” should be read before the term “public” in section 2(18) of the Income-tax Act, 1961. In CIT v. Baroda Investment Co. Ltd. [1979] 119 ITR 14, it has been held by a Division Bench of this court that companies which were public within the meaning of section 2(18) were thus covered by the term “public” used in that section. The second submission of Mr. Jetly must also be rejected.
4. In the result, the question referred to us is answered in the negative and in favour of the assessee. The Commissioner to pay the costs.