101 : Circular No. 101, dated 24-01-1973

12.  Whether public company will be deemed to be company in which public are not substantially interested by reason only of the fact that number of its directors at any time during previous year is less than six

1. Reference is invited to Circular No. 44 (LXXV-8) of 1955 [F.  No. 4(47)55/Tec.], dated 1-11-1955 of the then Central Board of Revenue on the above subject copy of which is enclosed for ready reference [Annex].

2. Necessary instructions may please be issued to the Income-tax Officers to follow the instructions for purposes of section 2(18)(b)(B)(iii) [as it stood prior to its substitution by the Finance Act, 1983, w.e.f. 2-4-1983].

Circular: No. 101 [F. No. 195/1/72-IT(A-I)], dated 24-1-1973.

ANNEX - CIRCULAR, DATED 1-11-1955 REFERRED TO IN CLARIFICATION

A question has been raised whether the public company will be deemed to be a company in which the public are not substantially interested within the meaning of the Explanation to section 23A of the 1922 Act (inserted by the Finance Act, 1955) by reason only of the fact that the number of its directors at any time during the previous year is less than six.  The case of such a company has to be considered under paragraph (iii) of the Explanation.  It is not possible to give a cut and dried definition of the expression "control of the affairs of a company".  It is, however, not the same as the running of the business from day-to-day by a director.  It is, therefore, not necessary that there should be not less than six directors in order that section 23A should not apply.