Judgment

JASWANT SINGH, J. :- These appeals by special leave are directed against the judgment dated February 9, 1971 of the Calcutta High Court whereby the following question referred to it under Sec. 66 (1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act) was answered in the affirmative i.e. in favour of the Revenue and against the appellant :-

"Whether on the facts and in the circumstances of the case, the assessee is a company whose business consists wholly or mainly in the dealing in or holding of investments?"

2. The facts material for our present purpose are : The assessee appellant is a private limited company incorporated under the Indian Companies Act, 1913, its shares being held by the members of Nawn family. For the assessment years 1955-56, 1956-57, 1957-58 and 1959-60 corresponding to the financial years ending on March 31, 1955 March 31, 1956, March 31, 1957 and March 31, 1959 respectively, the Income-tax Officer being of the view that since the rents accruing to the appellant from lands and house properties held by it formed a major part of its income, it was a company whose business consisted mainly in holding of investments as envisaged by sub-section (1) of Section 23A of the Act and Explanation 2 (i) thereto and since it had declared more than 60% but less than the prescribed statutory 100% of its total income as reduced by taxes referred to in clauses (a), (b) and (c) of the aforesaid sub-section as dividends, it was liable to super tax on the undistributed balance of the distributable profits at the prescribed rate of 50%. Accordingly with the previous approval of the Inspecting Assistant Commissioner, the Income-tax Officer levied additional super tax at 50% of the net distributable balance available with the appellant by applying the provisions of Section 23A (1) of the Act. Aggrieved by this order, the appellant took the matter in appeal to the Appellate Assistant Commissioner,who acceding to the contention of the appellant and following an order dated April 6, 1963, of the Income-tax Appellate Tribunal in Income-tax Appeal No. 5490 of 1961-62 for the assessment year 1958-59, held that the appellant was not a company whose business consisted wholly or mainly in the dealing in or holding of investments, and remitted the levy. dissatisfied with the order of the Appellate Assistant Commissioner, the Revenue took the matter to the Tribunal but could not persuade it to hold that the appellant was a company whose business consisted wholly or mainly in the dealing in or holding of investments. The Revenue then had the aforesaid question referred under Section 66 (1) of the Act to the High Court at Calcutta which by its aforesaid judgment dated February 9, 1971, answered the question in favour of the Revenue and against the appellant. It is against this judgment that the present appeals are directed.

3. It would be seen that the expression company whose business consists wholly or mainly in the dealing in or holding of investments consists of two parts viz. (1) of company whose business consists wholly or mainly in the dealing in investments and (2) a company whose business consists wholly or mainly in holding of investments, and what we are required in these appeals is to find out the true meaning of the latter part of the expression i.e. of investments in the context of a company whose business consists wholly or mainly in holding of sub-section (1) of Section 23A of the Act and Explanation 2 (i) thereto and to determine whether the appellant is a company whose business falls within the ambit of the said second part of the expression.

4. Our task has been facilitated to some extent because of the concession rightly and fairly made on behalf of the appellant that the objects for which it was incorporated included inter alia (1) purchase of lands and building and (2) letting out of lands and buildings in lieu of appropriate consideration and that during the years in question the appellant has