JUDGMENT

RANGANATH MISRA, J. - This appeal is by special leave and is directed against the judgment of the Bombay High Court dated July 16, 1974 on a reference made under Section 66(1) of the Income Tax Act, 1922. The year of assessment is 1951-52 corresponding to the accounting year ending March 31, 1951. The question referred by the Tribunal to the High Court at the instance of the revenue was :

Whether on the facts and in the circumstances of the case, the assessee company could not be held to be a company in which the public were substantially interested within the meaning of Explanation to Section 23-A(1) by reason of the fact that the shares of the company carrying not less than twenty-five per cent. of its voting power were not, in fact, freely transferable by holders to other members of the public for a large part of the previous year even though they were freely transferable as at the end of the previous year ?

2. Initially the company was incorporated as a private limited company at Jaipur on December 24, 1942 and was known as Messrs Rajputana Investment Company Private Limited. Under Articles 4, 81 and 82 of the Articles of Association of the company there was restrictio