ivil Appeal No 283 of 1972
Appeal by Special Leave from the Judgment and Order dated 12 7 1971 of the Delhi High Court in of 1967
Income Tax Reference No 31 of 1967
Bishamber Lal for the Appellant
VS Desai J Ramamurthi and RN Sachthey for the Res pondent
The Judgment of the Court was delivered by SARKARIA J
This appeal by special leave is directed against a judgment dated July 12 1971 of the High Court out of these facts The appellant hereinafter referred to as the assessee is an individual
The assessment year is 1955 56
Bharat Union Agencies Pvt Ltd had spent Rs53398 after the personal necessities of the assessee during the previous year ending 30 9 1964 without charging for the same
The assessee was not a director Of the said Company
He however was the beneficial owner of 1800 shares out of the total of 3000 equity shares of the said Company during the previous year
Similarly Alien Berry and Co Pvt Ltd had spent a sum of Rs 4406 after the personal necessities of the assessee without charging for the same
The Income tax Officer treated the total benefit of Rs 57804 received by the assessee from these two Companies as his income  under section 26Ciii of the Income tax Act 1922 which was introduced by the Finance Act 1955 with effect from 1 4 1955 and charged it to tax along with some other items of income
The assessee carried an appeal to the Appellate Assistant Commissioner who found that the assessee was beneficial owner of the shares of Bharat Union Agencies Pvt
Ltd carrying more than 20 per cent of the voting power
He further held on the basis of certain findings in the Report of the Commission of Inquiry on the administration of Dalmia Jain Companies published in 1963 that the assessee 656 had 100 per cent of the share holding control of Allen Berry and Co Pvt
Ltd The Appellate Assistant Commis sioner did not specifically deal with the question whether the assessee was concerned in the management of both these Companies
In the result he upheld the order of the Income tax Officer
The assessee preferred a further appeal to the Income tax Appellate Tribunal which held that the assessee was concerned in the management of the Bharat Union Agencies P Ltd being the beneficial owner of shares carrying more than 20 of the voting power and as such the benefit of Rs 53398 received by him from that Company was his in come  within the later part of Clause iii of section 26C of the Income tax Act 1922
On this reasoning the Tribunal dismissed the assessee s appeal in regard to the item of Rs 53398 
However it allowed on a different ground his appeal with regard to the item of Rs 4406 received from Alien Berry and Co P Ltd In this appeal we are not concerned with that item any more
At the instance of the assessee the Tribunal stated the case and referred the following question under section 661  of the Income tax Act 1922 to the High Court Whether on the facts and in the circum stances of the case the sum of Rs 53398 spent by Bharat Union Agencies P Ltd after the personal necessities of the assessee is income within the meaning of section 26Ciii of the Income tax Act 1922
The High Court answered this question against the asses see
Hence this appeal
At the outset Shri Bishamber Lal appearing for the appellant tried to contend that the item of Rs 53398 received by the assessee from Bharat Union Agencies Pvt
Ltd was not a benefit or perquisite within the contempla tion of section 26Ciii of the 1922 Act because firstly the constituents of this item were not cash amounts but gifts or bounties and secondly the receipt of this benefit by the assessee was unauthorised and could not be claimed by him as of right on the basis of any agreement with the Company
This was altogether a new plea
It was not even indi rectly raised before the authorities under the Income tax Act or the High Court
It has not been raised even in the Special Leave Petition under Article 136 of the Constitu tion
It was never the case of the assessee that this amount of Rs 53398 was not benefit obtained by the assessee from the Company within the meaning of section 26C iii
On the contrary it is apparent from the judgment of the Tribunal that there was no dispute about the fact that the assessee received benefits from both the Companies to the extent stated by the authorities below
ie benefits to the extent of Rs 53398 and Rs 4406 were received by the assessee from Bharat Union Agencies P Ltd and Allen Berry and Co Pvt Ltd respectively
The plea now sought to 657 be raised in regard to the item of Rs 53398 involves a question of fact
We therefore did not permit the Counsel to raise this plea for the first time at the time of argu ments before us
Counsel next contended that the expression concerned in the management of the business of the Company takes in only that person who by virtue of a position or office held by him in the Company legally and actually participates in the management of its business and not he who holds no such position or office but is in remote control of the Company and its affairs merely on account of being in ownership of a certain number of shares carrying more than 20 per cent or even the majority of the voting power
In support of this restricted construction of the term concerned Counsel referred to a decision of the Madras High Court in Arya Bhavan Madras vs
MS Narayana Rao1 wherein Rajamannar CJ held that the word concerned as used in the context of workman  in section 22 of the Industrial Disputes Appellate Tribunal Act 1950 connotes a more intimate and direct relation to the matter than the word interest and there fore this term should be given a more restricted meaning than the word interest
Mr Bishamber Lal also referred to the meaning of the terms concerned concerning as given in the Dictionary Words and Phrases Permanent Edition pp
504 505 Vol 8
Before dealing with this contention it will be appro priate to examine the material part of section 26Ciii of the 1922 Act which runs as follows iii the value of any benefit or perquisite whether convertible into money or not obtained from a company either by a director or by any other person who has a sub stantial interest in the company that is to say who is concerned in the management of the business of the company being the beneficial owner of shares not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits carrying not less than twenty per cent of the voting power and any sum paid by any such company in respect of any obligation which but for such payment would have been payable by the director or other person afore said
 From an analysis of Clause iii it is clear that it falls in two distinct parts
The first part is confined to the obtaining of the value of any benefit or perquisite from a Company by a director even if he has no substantial interest in the Company
The second part applies to a person who may not be a director but has a substantial interest in the Company
What is substantiaI interest is further equated by the succeeding expression that is to say with the coexistence of two elements namely i concern in the management of the business of the Company and ii beneficial ownership of shares not being shares entitled to a fixed rate of dividend carrying not less than twenty per cent of the voting power
There is no dispute before 1 AIR 1960 Mad
658 us that the assessee had obtained the benefit of Rs 53398 from Bharat Union Agencies Pvt
Ltd It is further admitted that he holds 1800 shares out of the total of 3000 equity shares in this Company carrying a voting power of 60 per cent
Thus the existence of the second element is more than satisfied
Controversy pivots around the first element only
The arguments which have been advanced before us on behalf of the assessee with regard to the construction and application of the expression concerned in the manage ment of the business of the Company were canvassed before the Tribunal also
The Tribunal repelled these arguments
The reasoning of the Tribunal with which the High Court found itself entirely in agreement is as under Shri Sharma conceded the position that the assessee was controlling both the Compa nies
in question
To exercise control over a Company is something more than to manage the Company
A person who manages the company may not necessarily be in a position to con trol the business or affairs of the Company
He may be managing under the instructions of
those who are controlling the Company
But a person who controls a Company also directly or indirectly through the managerial staff manages the business of the Company
It is again not necessary that the person who man ages the business of the Company should be rightfully entitled to do it
A person who is not rightfully entitled to manage the business of the Company but usurps the power by virtue of his certain position is in our opinion certainly a person covered by this expression
It is also not necessary that the management should be carried on in an ostensible manner
One who carried on the management indirectly and imperceptibly through the persons who outwardly and ostensi bly carry on the management is covered by the expression
It is not necessary in our opinion that the management should be both seen and felt it is sufficient if it is felt without being seen
 In our opinion the above is a correct exposition of the law on the point
The word concern is not a term of art having a precise fixed meaning
It has several nuances and is used to convey diverse shades of meaning over a wide spectrum
It may mean to have a relation to or bearing on be of interest or importance or to have an anxiety worry
Concerned as an adjective may mean interested involved
In one context it may mean one thing and in a different context another
The decisions as to the mean ing of this word used in a different context in another statute are scarcely of much value in construing it in the setting of the provision with which we are concerned
The best way therefore to construe this word is with refer ence to the context in which it is used
In sub clause iii of section 26C of the Income tax Act 1922 the word concerned takes its colour from the words in the manage ment of the business in association with which it occurs
In the context of business manage means to control to guide to administer to conduct or direct affairs 659 carry on business  Shorter Oxford Dictionary Webster New World Dictionary
Management includes the act of manag ing by direction or regulation or administration or con trol or superintendence
Construed with reference to the context and the circum stances of a case the expression person concerned in the management of the business may take in not only a person who directly participates or engages in the management of the business but also one who indirectly controls its man agement through the managerial staff from behind the scenes
The assessee s admission that he is in control of the Company necessarily includes an admission of his being concerned in the management of the business of the Compa ny We therefore agree with the High Court that the ambit of the term concerned in section 26Ciii cannot be restricted to a person who is an employee of the business or an office holder of the Company
In the context of manage ment it is wide enough to include every person interested  in the management in the sense of having the direction and control of the managerial staff
On the facts of the case the assessee was such a person
We are therefore of opinion that the High Court was right in answering the question referred to it against the assessee
The appeal fails and is dismissed with costs
PBR Appeal dismissed


Summary:
Section 26Ciii of the Income tax Act 1922 provides that the value of any benefit or perquisite whether con vertible into money or not obtained from a company either by a director or by any other person who has a substantial interest in the company that is to say who is concerned in the management of the business of the company being benefi cial owner of shares not being shares entitled to fixed rate of dividend carrying not less than 20 of the voting power and any sum paid by any such company in respect of any obligation which but for such appointment would have been payable by the director or other person aforesaid is income
The assessee was the beneficial owner of 1800 out of 3000 equity shares of a company
He was however not its director
He had a similar interest in another company
Both the companies had spent on his personal necessities a large sum of money which the Income tax Officer treated as his income under section 26Ciii of the Act
The Appellate Assistant Commissioner as also the Tribunal dismissed his appeal against the order of the Income tax Officer and the High Court answered the reference against the assessee
In appeal to this Court it was contended that the ex pression concerned in the management of the business of the company takes in only the person who legally partici pates in the management of its business and not one who has only remote control of its business
even if he had the majority of voting power
Dismissing the appeal HELD The expression person concerned in the management of businessmay take in not only a person who directly partici pates or engages in the management of the business but also one who indirectly controls its management through the managerial staff from behind the scenes
657 B 1
a The term concerned in section 26Ciii cannot be restricted to a person who is an employee of the business or an office holder of the company
In the context of manage ment it is wide enough to include every person interest ed in the management in the sense of having the direction and control of the managerial staff
659 C D b The word concerned is not a term of art having a precise and fixed meaning
It has several nuances and is used to convey diverse shades of meaning
It may mean to have a relation to
or bearing on be of interest 0r importance or to have an anxiety worry
Concerned as an adjective may mean interested involved
In one context it may mean one thing and in a different context another
658 G H c The word concerned takes its colour from the words in the management of the business in association with which it occurs
In the context of business manage means to control
to guide
to administer to conduct or direct affairs  carry on business Management includes the act of managing by direction or regulation or adminis tration or control or superintendence
658 H 659 A 655 2 The first part of the clause is confined to the ob taining of the value of any benefit or perquisite from a company by a director even if he has no substantial inter est in the company
The second part applies to 2a person who may not be a director but has a substantial interest in the company
What is substantial interest is further equated by the succeeding expression that is to say with the co existence of two elements namely i concern in the management of the business of the company and ii benefi cial ownership of shares not being shares entitled to a fixed rate of dividend carrying not less than 20 of the voting power
657 G H In the instant case the assessee Obtained the benefit from the company holding 1800 out of 3000 shares that is carry ing a voting power of 60 and therefore satisfied the second element
His own admission that he was in control of the company necessarily includes an admission of his being concerned in the management of the business of the company
658 A B