The main legal point established in the judgment is that the beneficial interest in the shares is immaterial in determining controlling interest, and the power of controlling by votes is crucial in establishing a director controlled company.

BANERJEE, J.

1. IN this reference we are required to give our opinion on the following question :--

"Whether in the facts and circumstances of these cases, the Tribunal was right in holding that the directors of the respondent company had a controlling interest in it as contemplated by s. 2(21) of the EPT Act."

This reference has been made at the instance of the CIT of Excess Profits Tax Act, West Bengal, and arises out of five consolidated applications made under the Excess Profits Tax Act covering the chargeable accounting periods ended 31st Dec., 1939, to 31st Dec., 1943. The point involved in them is the same. The dispute before the AAC and the Tribunal was whether the respondent company was or was not a director controlled company within the meaning of s. 2(21) of the Excess Profits Tax Act, 1940, during the chargeable accounting periods in question. The material portion of that section is as follows :

"Statutory percentage" means--(a) in relation to a business carried on by a body corporate (other than a company the directors whereof have a controlling interest therein), eight per cent. per annum ; . . . . (c) in relation to a business to which sub-cl. (a) does not apply, ten per cent per annum. If the respondent company is a director controlled company, then on the increase in its average capital, the statutory percentage allowed under that section will be 10 per cent. and if not, it will be 8 per cent. The respondent company was incorporated under the INdian Companies Act having a capital of Rs. 36 lacs divided into 3,60,000 shares of Rs. 10 each. During the chargeable accounting periods in question, these shares were held as follows :-- Article 90 of the Articles of Association of the respondent company is as follows :-- Name of shareholder. Number of shares held in C. A. Ps. ended 31-12-1939 and 31- 12-1940 Number of shares held in C. A. Ps. ended 31-12-1941,31-12- 1942 and 31-12-1943 1.M/s Aluminium Ltd. MONTREAL 3,59,790 3,59,600 2. Mr. L. G. Bash 10 ... 3. " P. J. Pathak 100 100 4. " Manu Subhedar 100 100 5. " H. K. Shah ... 100 6. " Kenneth Hall ... 100

"90. Where a company registered under the provisions of the INdian Companies Act or not is a member of this company a person duly appointed to represent such company at a meeting of this company in accordance with the provisions of s. 80 of the INdian Companies Act, 1913, shall not be deemed to be a proxy but shall be entitled to vote for such company on a show of hands and to exercise the same powers on behalf of the company which he represents as if he were an individual member of this company including the power to appoint a proxy whether special or general and the production at the meeting of a copy of such resolution appointing such representative duly signed by one director of such company and by the secretary (if any) and certified by them or him as being a true copy of the resolution shall on production at the meeting be accepted by this company as sufficient evidence of the validity of his appointment."

Article 105 empowers Aluminium, Ltd., to appoint three permanent directors on the board of directors. Article 113 provides that the nominee director appointed by Aluminium, Ltd., shall act as chairman of the meeting of the directors.

2. THE first directors were Mr. Jeewanlal Motichand and Mr. Ramji Hansraj nominated by the respondent company, and Mr. L. G. Bash, Mr. C. G. Bowen and Mr. R. E. Powell nominated by Aluminium, Ltd. THE articles also provide that the directors nominated by Aluminium, Ltd., were entitled to retain office for life. All the life directors except Mr. Bash ultimately retired. Mr. Bash continued in that office. By several resolutions passed by the directors of Aluminium, Ltd., between 23rd May, 1935, and 20th October, 1942, it was resolved that Aluminium Ltd., "a corporation organised and existing under the Companies Act of the Dominion of Canada, hereby constitutes and appoints Mr. Lawson G. Bash its true and lawful agent and att