1 903 itxa 3926.10 .doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION K INCOME TAX APPEAL NO.3926 OF 2010 The Commissioner of Income Tax – V .. Appellant. Vs. Finolex Technologies Ltd. .. Respondent. Mr. Vimal Gupta for the Appellant. Mr. S.N.Inamdar for the Respondent. CORAM : J.P. DEVADHAR, K.K. TATED, JJ. DATE : 17TH AUGUST, 2011. P.C. 1 Whether the ITAT was justified in holding that the Respondent Assessee is a Company in which the public are substantially interested and therefore, the benefit of set off and carry forward of loss cannot be denied to the Assessee under section 79 of the Income Tax Act, 1961, is the question raised in this Appeal. 2 The Assessee Company is registered under the Companies Act as a public company. The Assessee Company was formed under the Joint Venture Agreement entered into by and between AT&T International INC of 2 903 itxa 3926.10 .doc USA and Finolex Cables Ltd. a company incorporated in India. The Joint Venture Agreement provided that in case of any conflict, the Joint Venture Agreement would prevail over the Articles of Association of the Company. As the Joint Venture Agreement contained restrictions on transfer of shares, the Assessing Officer was of the view that the Assessee Company was liable to be treated as a private company and accordingly the provisions of section 79 of the Income Tax Act would apply. 3 On Appeal filed by the Assessee, the CIT (A) disagreed with the Assessing Officer and held that the Assessee is a Company in which public are substantially interested. ITAT has upheld the order of CIT (A). Challenging the orders of ITAT, the present Appeal is filed. 4 Under section 2 (18) (b) of the Income Tax Act, 1961 the expression “a company in which the public are substantially interested” means a company which is not a private company as defined under the Companies Act, 1956 and fulfills the condition specified therein. 5 Section 3(1)(iii) of the Companies Act, 1956 defines the expression “Private Company” to means a Company which by its Articles restricts the right to transfer its shares. In the present case, admittedly, the Assessee 3 903 itxa 3926.10 .doc Company is registered as a public Company under the provisions of Companies Act, 1956 and the Articles of Association of the Assessee Company do not prohibit transfer of shares. The Apex Court in the case of V.B. Rangaraj v/s V.B.Gopalkrishnan and others reported in AIR 1992 S.C. 453 has held that any restriction on transfer of shares not contained in the Articles of Association of the Company but contained in a private arrangement between the shareholders is not binding on the Company. In the present case, the restriction on transfer of shares is to be found in the Joint Venture Agreement and not in the Articles of Association of the Assessee Company. 6 In these circumstances, the decision of the ITAT in holding that Assessee is not a private company but public company to which the provisions of section 79 of the Income Tax Act, 1961 did not apply cannot be faulted. In the result, we see no merit in the Appeal. The Appeal is dismissed with no order as to costs. (J.P. DEVADHAR, J.) (K.K. TATED, J.)