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

This appeal by special leave is directed against a judgment dated July 12, 1971, of the High Court of Delhi. It arises out of these facts The appellant (hereinafter referred to as the assessee) is an individual. The assessment year is 1955-56Bharat Union Agencies Pvt. Ltd. had spent Rs. 53, 398 after the personal necessities of the assessee during the previous year ending September 30, 1954, without charging for the same. The assessee was not a director of the said company. He, however, was the beneficial owner of 1, 800 shares out of the total of 3, 000 equity shares of the said company during the previous year. Similarly, Allen Berry and Co. Pvt. Ltd. had spent a sum of Rs. 4, 406 after the personal necessities of the assessee, without charging for the sameThe Income-tax Officer treated the total benefit of Rs. 57, 804 received by the assessee from these two companies as hisunder section 2(6C)(iii) of the Indian Income-tax Act, 1922, which was introduced by the Finance Act, 1955, with effect from April 1, 1955, and charged it to tax along with some other items of incomeThe assessee carried an appeal to the Appellate Assistant Commissioner who found that the assessee was the 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 had 100 per cent. of the shareholding control of Allen Berry and Co. Pvt. Ltd. The Appellate Assistant Commissioner did not specifically deal with the question whether the assessee wasconcerned in the management ofboth these companies. In the result he upheld the order of the Income-tax OfficerThe assessee preferred a further appeal to the Income-tax Appellate Tribunal which held that the assessee wasconcerned in the management ofthe Bharat Union Agencies Pvt. Ltd., being the beneficial owner of shares carrying more than 20% of the voting power, and as such the benefit of Rs. 53, 398 received by him from that company was hislatter part of clause (iii) of section 2(6C) of the Indian Income-tax Act, 1922. On this reasoning the Tribunal dismissed the assessees appeal in regard to the item of Rs. 53, 398. However, it allowed, on a different ground, his appeal with regard to the item of Rs. 4, 406 received from Allen Berry and Co. Pvt. Ltd. In this appeal we are not concerned with that item any moreAt the instance of the assessee, the Tribunal stated the case and referred the following question under section 66(1) of the Indian Income-tax Act, 1922, to the High Courtr, on the facts and in the circumstances of the case, the sum of Rs. 53, 398 spent by Bharat Union Agencies Pvt. Ltd. after the personal necessities of the assessee is income within the meaning of section 2(6C)(iii) of the Indian Income-tax Act, 1922 ?The High Court answered this question against the assessee. Hence, this appeal.

Reasoning: 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.