Case: R. Dalmia Vs. Commissioner Of Income-Tax, New Delhi

contention, it will be appropriate to examine the material part of section 2(6C)(iii) 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 substantial 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 aforesaid. 8. 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 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) 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 us that the assessee had obtained the benefit of Rs. 53, 398 from Bharat Union Agencies Pvt. Ltd. It is further admitted that he holds 1, 800 shares out of the total of 3, 000 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 onlyThe 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 management 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 companies 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 control 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 manages 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 ostensibly 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. 9. 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 meaning 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 reference to the context in which it is used. In sub-clause (iii) of section 2(6C) of the Indian Income-tax Act, 1922, 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 (Shorter Oxford Dictionary, Websters New World Dictionary). Management includes the act of managing by direction, or regulation, or administration or control or superintendenceConstrued with reference to the context and the circumstances 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 management through the managerial staff, from behind the scenes. The assessees 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 company . We, therefore, agree with the High Court, that the ambit of the term concerned in section 2(6C)(iii) cannot be restricted to a person who is an employee of the business or an office-holder of the company. In the context of management 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. 10.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]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 isis 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) 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 us that the assessee had obtained the benefit of Rs. 53, 398 from Bharat Union Agencies Pvt. Ltd. It is further admitted that he holds 1, 800 shares out of the total of 3, 000 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 onlyThe arguments which have been advanced before us on behalf of the assessee with regard to the construction and application of the expressionconcerned in the management ofthe business of the company, were canvassed before the Tribunal also. The Tribunal repelled these argumentsIn our opinion, the above is a correct exposition of the law on the point. The wordis 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 meanto have a relation to, or bearing on, be of interest or importance orto have an anxiety, worry .as an adjective may meaninvolved . In one context, it may mean one thing, and in a different context another. The decisions as to the meaning 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 reference to the context in which it is used. In sub-clause (iii) of section 2(6C) of the Indian Income-tax Act, 1922, the wordtakes its colour from the wordsin the management of the business , in association with which it occurs. In the context of business,to control, to guide, to administer, to conduct or direct affairs ; carry on business(Shorter Oxford Dictionary, Websters New World Dictionary).includes the act of managing by direction, or regulation, or administration or control or superintendenceConstrued with reference to the context and the circumstances of a case, the expressionconcerned in the management ofmay take in not only a person who directly participates or engages in the management of the business but also one who indirectly controls its management through the managerial staff, from behind the scenes. The assessees admission that he is in control of the company, necessarily includes an admission of his beingconcerned in the management ofthe business of the. We, therefore, agree with the High Court, that the ambit of the termsection 2(6C)(iii) cannot be restricted to a person who is an employee of the business or an office-holder of the company. In the context ofit 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.