Summarize the following court judgment. l Appeal c	 No. 380 of 1957. Appeal from the judgment and order dated March 8	 1956	 of the Bombay High Court in Income tax Reference No. 4 of 1956. N. A. Palkhivala	 section N. Andley	 Rameshwar Nath	 J. B. Dadachanji and P. L. Vohra	 for the appellant. A. N. Kripal and D. Gupta	 for the respondent. December 7. The Judgment of the Court was delivered by HIDAYATULLAH	 J. This appeal	 on a certificate by the High Court	 has been filed by Shree Changdeo Sugar Mills	 Ltd.	 to which section 23A of the Income tax Act (prior to its amendment by the Finance Act	 1955) was applied in respect of the assessment year	 1948 49. The question which was referred to the High Court was whether at the relevant time the assessee Company could be deemed to be a Company	 in which the public were substantially interested. This question was answered in the negative by the High Court. During the assessment year	 the Company had not distributed dividends to the extent of 60 per cent. of its profits	 and an order under section 23A(1) of the Indian Income tax Act was passed by the Income tax Officer. The Company appealed to the Appellate Assistant Commissioner	 who dismissed the appeal. It next appealed to the Tribunal	 but was unsuccessful. The Tribunal	 however	 referred the above question which	 as already stated	 was answered in the negative by the High Court. The issued	 subscribed and paid up capital of the assessee Company consisted of 60	000 shares	 which were distributed as follows: 992 (1) 11 Directors of the Company 41	500 shares. (2) The Managing Agency Firm 2	300 shares. (3) Mysore Merchants Ltd. 11	880 shares. (4) Others. . 4	320 shares. 60	000 shares. The question arose in determining whether the public were substantially interested in the Company	 that is to say	 held 25 per cent. of the voting power. The Bombay High Court in determining this point followed its decision in Raghuvanshi Mills V. Commissioner of Income tax (1)	 and held that no holding by the Directors of a company could be regarded as one in which the public were substantially interested. We have heard Civil Appeal No. 30 of 1957 from the decision of the Bombay High Court in the Raghuvanshi Mills case (1)	 in which judgment has been pronounced today	 and have held that that is not the correct test to apply. We have remanded the said appeal	 after setting out the correct test to apply. What we have said there applies equally here. There is yet another question	 which arose in this appeal but not in the appeal of the Raghuvanshi Mills. As we have already stated	 Mysore Merchants Ltd.	 held 11	880 shares of the assessee Company. If these shares could be said to be held by the public along with 4	320 shares	 the public would be holding 25 per cent of the voting power	 whether or not the Directors of the Company held the rest of the shares. It was. 	 therefore	 necessary for the High Court to consider whether the shares held by Mysore Merchants 'Ltd.	 could be said to be held by the public. The High Court held against the assessee Company that they could not be counted as part of the holding by the public	 and	 in our judgment	 the High Court has reached the correct conclusion. The matter has to be judged under the third proviso to section 23A(1)	 which read as follows: "Provided further that this sub section shall not apply to any company in which the public are (1) 993 substantially interested or to a subsidiary company of such a company if the whole of the share capital of such subsidiary company is held by the parent company or by the nominees thereof. Explanation. 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 unconditio nally by	 and are at the end of the previous year beneficially held by	 the public (not including a company to which the provisions of this sub section apply)	 and if any such shares have in the course of such previous year been the subject of dealings in any stock exchange in British India or are in fact freely transferable by the holders to other members of the public. " In applying the proviso and the Explanation	 we have to give effect to the words "not including a company to which the provisions of this sub section apply"	 and have to determine whether Mysore Merchants Ltd.	 is a Company	 to which the provisions of section 23A can be said to be applicable. Learned counsel for the assessee Company contends that in deciding this	 we have to be satisfied on three points	 which he summarises as follows: (a)The public should not be substantially interested in that Company; (b)It must have assessable profits for the relevant assessment year; and (c)It must not have distributed 60 per cent of its net assessable profits. He contends that unless these three conditions are fulfiled	 section 23A will not apply to Mysore Merchants Ltd.	 and that the shares held by it will be deemed to be held by the public. He points out that Mysore Merchants Ltd.	 had no assessable income in the corresponding assessment year and had suffered a loss	 that conditions (b) and (c) did not	 therefore	 apply	 and 994 that section 23A is not applicable to that Company. In our opinion	 the paramount condition is that even in that Company the public should be beneficially interested in 25 per cent. of the voting power	 and it was admitted before us that it was not a public Company at all but a private Company	 and that	 therefore	 the public were not interested in that Company. The shares held by Mysore Merchants Ltd.	 cannot at all be counted as a holding in which the public are beneficially interested	 in view of the exclusion contained in the Explanation. This point will not	 therefore	 be open for the determination of the High Court	 when the question is reconsidered by the High Court in the light of our observations in The Raghuvanshi Mills.Ltd. vs Commissioner of Income tax	 Bombay (1)	 decided today. Learned counsel for the assessee Company also contended that in view of cl. 14 of the Part B States (Taxation Concessions) Order	 1950	 the provisions of section 23A could not be applied to Mysore Merchants Ltd. That clause reads as follows: " 14. Requiring distribution of dividends by private companies. The provisions of section 23A of the Act shall not be applied in respect of the profits and gains of any previous year ending before the appointed day unless the State law contained a provision corresponding thereto. " This Concession would be open to Mysore Merchants Ltd.	 if it satisfied the terms of Cl. That	 however	 cannot detract from the application of section 23A to determine whether the shares hold by it can be described as those in which the public are beneficially interested in another company. The Explanation requires that the shares held by a company should be considered as held by the public	 only if section 23A does not apply to it. The Concessions Order does not seek to negative this test; it only confers a benefit on a company	 to which cl. 14 applies. Mysore Merchants Ltd.	 may be able to avail of that concession	 and still fall within (1) ; 995 section 23A for other purposes. This contention has no force. The appeal is allowed	 and the case is remitted to s the High Court for deciding the question in the light of the observations in our decision in the Raghuvanshi Mills case (1). As the case is remanded	 the costs of this appeal shall be paid by the respondent	 but the costs in the High Court will abide the result. Appeal allowed.

During the assessment year	 the company had not distributed dividends to the extent of 60% of its profits and an order under section 23A(1) of the Act was passed by the Income tax Officer. The question referred by the Tribunal to the High Court was whether at the relevant time the assessee company could be deemed to be a company in which the public were substantially interested	 i.e.	 held 25% of the voting power	 was answered in the negative. Held	 that the test that no holding by the Directors of a company could be regarded as one in which the public were substantially interested was not the correct test to apply. The test as laid down in Raghuvanshi Mills vs Commissioner of Income tax	 ; 	 would apply to this Case. Held	 further	 that the paramount condition in applying the proviso and the explanation of section 23A(1) was that the public should be beneficially interested in 25% of the voting power. 	 The explanation to section 23A required that shares held by the company should be considered as held by the public	 only if section 23A did not apply to it. The concession order in cl. 14 of the; Part B States (Taxation Concession) Order	 1950	 did not seek to negative that test	 it only conferred a benefit on a company	 991 to which cl. 14 applied	 and the company could avail that concession	 and still might fall within section 23A for other purposes. The Raghuvanshi Mills Ltd. vs Commissioner of Income tax	 SI ' Bombay	 ; 	 applied.