vil Appeal No 1294 NT of 1975
From the Judgment and order dated 16774 of the Bombay High Court in IT Reference No 22 of 1965
SC Manchanda MK Sashidharan and Ms A Subhashini for the Appellant
Harish
N Salve Parveen Kumar and V Gambhir for the Respondent
The Judgment of the Court was delivered by RANGANATH MISRA J
This appeal is by special leave and is directed against the judgment of the Bombay High Court dated 1671974 on a reference made under Section 661 of the Income Tax Act 1922
The year of assessment is 1951 52 corresponding to the accounting year ending 3131951
The question referred by the Tribunal to the High Court at the instance of the Revenue was Whether on the facts and in the circumstances of the case the assessee company could not be held to be a company in which the public were substantially interested within the meaning of Explanation of section 23A1 by reason of the fact that the shares of the company carrying not less than twenty five per cent of its voting power were not in fact freely trans ferable by holders to other members of the public for a large part of the previous year even though they were freely transferable as at the end of the previous year  Initially the company was incorporated as a private limited company at Jaipur on 24121942 and was known as Messrs Rajputana Investment Company Private Limited
Under articles 4 81 and 82 of the Articles of Association of the company there was restriction on the transfer of the shares of the Company by the shareholders to other 573 members of the public
These articles were deleted at an extraordinary general meeting of the Company held on 26th March 1951 and following the deletion the restriction on transfer of shares was removed
So was the limit of number of shareholders
On the basis of the amendment the assessee claimed relief under section 23A1 of the 1922 Act by pleading that all the statutory requirements were satisfied
The income Tax Officer refused to accept the stand of the asses see on the ground that while the Explanation contained in section 23A1 of the Act required that in course of the previous year the shares were freely transferable by the holders to other members of the public the company came to satisfy the requirement only for four or five days of the year
The Appellate Assistant Commissioner adopted the same view whereupon the assessee appealed to the Tribunal
The Tribu nal accepted the stand of the assessee and allowed the appeal whereupon at the instance of the Revenue the afore said question was referred and the case was stated to the High Court under section 661 of the 1922 Act
The High Court found for the assessee and against the Revenue
That has led to the present appeal by special leave
As pointed out above the short point for consideration in this appeal is as to whether the assessee satisfied the requirements of the Explanation to section 23A1 of the Act so as to be entitled to the tax benefit
This Court pointed out in the case of CITv
Arco P Ltd 19631 Section 23A was enacted to prevent evasion of liability to pay super tax by shareholders of certain classes of companies taking advantage of the disparity between the rates of super tax payable by individuals and by the compa nies
The rates of super tax applicable to companies being lower than the highest rates applicable to individual assessees to prevent individual assessees from avoiding the higher incidence of super tax by the expedient of transferring to companies the sources of their income and thereby securing instead of divi dends the benefit of the profits of the compa ny the Legislature by Act XXI of 1930 as modified by Act VII of 1939 enacted a special provision in section 23A investing the Income tax Officer with power in certain contingencies prescribed in the section to order that the undistributed balance of the assessable income reduced by the amount of taxes and the divi dends shall be deemed to have been distributed at the date of the general meeting
 574 The Explanation provided For the purpose of this sub section  a company shall be deemed to be a company in which the public are substantially interested if shares of the company not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits carrying not less than twenty five per cent of the voting power have been allotted unconditionally to or acquired unconditionally by and are at the end of the previous year beneficially held by the public not including a company to which the provi sions of this sub section apply and if any such shares have in the course of such previ ous year been the subject of dealings in any stock exchange in the taxable territories or are in fact freely transferable by the holders to other members of the public The only question that has engaged the attention of the Tribunal and the High Court at the instance of the respec tive parties is as to whether the shares were freely trans ferable by the holders to other members of the public in the course of the previous year
As we have already pointed out the Income Tax Officer and the first appellate authority held that the terms in the Explanation required that the shares should have been freely transferable by the share holders to other members of the public at every point of time during the previous year and transferability should be established by actual transfer
The Tribunal and the High Court took the view that it was not necessary that as a fact there should have been some transfer of such shares but transferability as an incidence should have been at every point of time during the whole of the previous year
That being the short question on which this appeal can be effec tively disposed of there is no necessity to refer to other aspects which had been canvassed at earlier stages
Indisputably until 26th of March 1951 the shares were not freely transferable in view of the three provisions in the Articles and with the deletion of those free transfera bility of the shares was acquired
There has been no dispute before us that the requirement if any such shares have been in the course of such previous year would also apply to the last requirement are in fact freely transferable by the holders to other members of the public
The only conten tious aspect is as to whether in the course of such previ ous year would mean throughout the year or any part of it
575 There is no direct authority indicating the true meaning of this requirement in the Explanation one way or the other
The purpose of enacting section 23A as pointed out in Afro s case was to control evasion of tax
The Explanation has reference to the point of time at two places the first one has been stated as at the end of the previous year and the second which is in issue is in the course of such previous year
Counsel for the Revenue has emphasised upon the feature that in the same Explanation reference to time has been expressed differently and if the legislative intention was not to distinguish and while stating in the course of such previous year it was intend ed to convey the idea of the last day of the previous year there would have been no necessity of expressing the posi tion differently
There is abundant authority to support the stand of the counsel for the Revenue that when the situation has been differently expressed the legislature must be taken to have intended to express a different intention Course  ordinarily conveys the meaning of a continuous progress from one point to the next in time or space and conveys the idea of a period of time duration and not a fixed point of time
In the course of such previous year would therefore refer to the period commencing with the beginning of the previous year and terminating with the end of the previous year
If that be the meaning of the phrase in the course of such previous year it would necessarily mean that free transferability of the shares by the holders to other members of the public should be present throughout the previous year
Admittedly that was not the position in this case as transferability was acquired only on 26th of March 195 1
We are of the view that the Tribunal and the High Court went wrong in holding that the conditions re quired by the Explanation were satisfied and the benefit under the section was available to the assessee
The appeal is allowed
The order of the High Court approving the view taken by the Appellate Tribunal is set aside and the question referred to the High Court is an swered thus On the facts and in the circumstances of the case the assessee company could not be held to be a company in which the public were substantially interested within the meaning of the Explanation to section 23A1 by reason of the fact that for a large part of the previous year the shares 576 were not freely transferable though they were so transfer able at the end of the previous year and against the assessee
Parties are directed to bear their own costs throughout
TNA Appeal allowed


Summary:
The respondents are dealers in hides and skins
They deal among other things in splits and coloured leather
The splits are the cut pieces small and irregular obtained in the process of cutting raw or tanned hides and skins either with a view to reduce their thickness or to give them a regular shape
Coloured leather is obtained when the tanned hides and skins are dyed with various colours
The claim of the respondents is that these two items fail in the list of goods of special importance in inter State trade and com merce set out in section 14 of the and therefore entitled to the concessions available under section 15 of the Act namely the benefits of single point taxation and of a smaller rate of tax
Such claims were allowed by the assessing authority in respect of coloured leather and in respect of splits he disallowed the claims
The Appellate Assistant Commissioner upheld the order of the assessing authority
The Board of Revenue negativated the contention that leather splits continued to be dressed skins under declared goods of inter State importance and held that these splits are to be treated as scraps  or to be taxed at the multiple rates
As regards coloured leather the Board held that these are commercially different products and that the exemption granted was not correct
The tribunal in certain cases had held that the assessee was entitled to the con cessions claimed in respect of both items
The respondents moved the High Court by way of Writ Peti tions 446 and tax revision cases and the High Court upheld the claim of the respondents holding that splits  and coloured leather  continue to be hides and skins eligible for special treatment under the 
The present appeals by special leave are against those judgments of the High Court
The contentions of the appellant State were that the leather splits or cuttings are scrap and do not qualify any longer to be described merely as hides and skins and that coloured leather is a totally new and sophisticated product known as leather and can no longer be described merely as hides and skins and as such cannot qualify for exemption
On behalf of the respondents a reference was made to certain circulars of the authorities which contain a contem poraneous exposition of the meaning of the entry in question and contended that to say that one item being called scraps and the other as leather would not be sufficient to take them out of the description hides and skins in a raw or dressed state and cuttings of hides and skins would not cease to be hides and skins merely because they are small pieces and can be loosely described as scraps
As for coloured leather it was contended that the exact scope of the expression used in entry iii of section 141 which re ferred to hides and skins whether in a raw or dressed state  would have to be looked into
Dismissing the appeals HELD 11
The High Court was right in holding that splits  and coloured leather  continue to be hides and skins eligible for special treatment under the 
456E 12 A contemporaneous exposition by the administrative authorities is a very useful and relevant guide to the interpretation of the expressions used in a statute
Consid ering that the clarification was sought for from the Minis try of Commerce at the earliest point of time when a doubt arose as to the scope of the expression used by the statute and given after considering the technicalities of the proc esses employed in the manufacture of finished leather by the department fully conversant with this branch of trade and in the context of the provisions of this very statute the terms of the statute can well be construed by reference to such exposition in the absence of anything in the statute to indicate the contrary
Indeed such interpretation should be shown to 447 be clearly wrong before it is overturned
The view of the Ministry was that the expression hides and skins in the raw or dressed State  refers at one end to the raw material obtained from the slaughtered or dead animals and at the other end to the tanned and finished material the expres sion therefore seems to include the other intermediate stages as well Dressing  according to the authoritative interpretations would mean the conversion of tanned hides and skins by further suitable processing into leathers of different types which are ready for use
452F H 452B D Desh Bandhu Gupta and Ors
vs Delhi Stock Exchange   Verghese vs ITO  relied on
Mahi Traders vs State of Tamil Nadu 1980 45 STC 327 approved
Definitions in this regard show that hides and skins acquire the name of leather  even if the hair or wool has not been removed therefrom as soon as they receive some treatment which prevents them from putrefaction after treat ment with water Dressing  is a stage much later than tanning
Indeed from the definitions it is clear that it is practically the same as giving finishing touches to the leather and making it suitable for the manufacture of par ticular types of goods
The findings of the Tribunal in this regard in an earlier case which had not been appealed against by the Department that under the  the appellant is in a much better position because all the hides and skins are brought together in one entry and whether raw or dressed the product falls under the same entry seems to be the correct view of the scope of the entry in question
454B D 455E Glossary of terms relating to hides skins and leather published by ISI in 1960 Dictionary of Leather Terminology published by the Tanners  Council of America
Encyclopedia Britannica Vol 7 and Wealth of India 
 a publica tion of the Council of Scientific and Industrial Research 1966 relied on
Hides and skins are termed leather  even as soon as the process of tanning is over and the danger of their putrefaction is put an end to
The entry in the  however includes within its scope hides and skins until they are dressed 
This represents the stage when they undergo the process of finishing and assume a form in which they can be readily utilised for manufacture of various commercial articles
In this view it is hardly material that coloured leather may be a form of leather or may even be said to represent a different commer 448 cial commodity
The statutory entry is comprehensive enough to include the products emerging from hides and skins until the process of dressing or finishing is done
456C E