V. Kamaswami, J.
1. For the assessment year 1960-61, the Income-tax Officer treated a sum of Rs. 3,21,173 as dividend within the meaning of Section 2(6A)(e)of the Indian Income-tax Act, 1922, hereinafter called 'the Act', and included the sarna in the assessee's total income. The assessee is the karta of a Hindu undivided family. One .Rudrappan was the karta of the Hindu undivided family prior to the present assessee. He was the managing partner in a firm called R. Guruswamy Naidu & Co. with six annas share. This firm was the managing agent of a public limited company called Vijayakumar Mills Ltd., hereinafter called 'the company'. The company had a share capital of Rs. 20 lakhs divided into 8,000 preference shares of Rs. 100 each and 12,000 equity shares of Rs. 100 each. According to one of the articles of association of the company, the regulations contained in Table 'A' of the First Schedule of the Companies Act governedthe company. According to regulation 60 of Table 'A' every member has one vote for every share held by him, no distinction being kept between preference and equity shares. The accounting year of the company is the calendar year. During the year 1959, out of the 12,000 equity shares 6,834 were held as under :
1.V. Gopal Naidu161 SharesDirector2. G. Purushotham (son of No. 1)861''3. G. Krishnan (son of No. 1)186 ''4. G. N. Sam (son of No. 1)161''5. G. R. Rudrappan (step-brother of G. Krishnan)2,015''6. G. Venkataraman (Brother of No. 5)653''7. P. Balasubramaniam (son of No. 2)159 ''8. Vijayakumar (son of No. 3)659''9. Mani (unmarried daughter of No. 2)100 ''10. Travancore Forward Bank Ltd.1,328 ''11. Mrs. Kamalam Purushotham (wife of No. 2)200''12. A. Amirtha (married daughter of No. 2)101''13. P. Neelaveni (married daughter of No. 2)100 ''14. S. V. Raman150
2. The shares held by Travancore. For ward Bank Ltd. are the shares pledged by G. Krishnan. In the register of members of the company, the name of this bank appears as the holder of the shares. The dividend income from these shares was assessed in the hands of G. Krishnan. The main business of the company was manufacture and sale of yarn, but in the year 1959, it sold besides yarn, cotton worth Rs. 17 lakhs. The cotton that was sold was not required for its immediate use in the mills and was sold after obtaining the permission of the Textile Commissioner. The board of directors of the company consisted of six persons of which four were the father and three sons.
3. The balance sheet of the company as on January 31, 1959, showed the following reserves:
' Reserve for redemption of preference shares...Rs. 3,20,000Development rebate reserve... Rs. 1,50,600
4. There was net loss of Rs. 1,49,427 brought forward from the previous year. In the balance-sheet as on December 31, 1959, the statutory auditor made an observation that from the current books he found large sums of money received in the current year were paid and debited to suspense account for want of information and that such sums amounted to Rs. 5.90,705.30. The board of directors explained stating that late Rudrappan was handling the company's cash balance and, due to his sudden and unexpected death, they were not able to collect the relevant information and hence such amounts pending clarification had been debited to suspense account. The board of directors corresponded with the assessee herein and got a reply from the assessee that in late Rudrappan's account a sum of Rs. 4,50,000 had been advanced to various parties without corresponding credit in his account books and that it was possible that Rudrappan might have utilised the company's money in his possession for making such advances. In order to set the matter at rest, the assessee further added that he did not propose to question the liability of the estate to pay the sum of Rs. 4,50,000.
5. The Income-tax Officer considered that the company was one in which the public were not substantially interested, that the whole sum of Rs. 4,50,000 represented a payment by way of loan or advance by the company to the assessee. He then went into the question of availability of profits. He determined that the balance of Rs. 3,21,173 arrived at after deducting Rs. 1,49,427, the brought forward loss from the two reserve amounts amounting to Rs. 4,70,000 represented the accumulated profits in the hands of the company. The Income-tax Officer rejected the contention that there was no loan or advance by the company to the individual shareholders and that the said Rudrappan helped himself with the funds of the company and that misappropriation or embezzlement should not be considered as payment by way of a loan. In that view he held Rs. 3,21,173 as dividend under Section 2(6A)(e) of the Act in the hands of the assessee.
6. In the appeal preferred by the assessee originally, the Appellate Assistant Commissioner confined his consideration to the question whether the sum of Rs. 4,50,000 represented a loan or advance by the company to the assessee. He held that Rudrappan had criminally misappropriated the funds of the company, that the other partners of the managing agency firmwere not aware of the acts of Rudrappan, that there was no entry in the books of the company to show that any loan had been given to the assessee and that, therefore, there was no payment by the company to a director or a shareholder as required under Section 2(6A)(e). In that view he did hot consider it necessary to decide the other issue. The department preferred an appeal to the Tribunal. The Tribunal called for a finding from the Appellate Assistant Commissioner on the question whether the company is one in which the public are substantially interested and whether there was the accumulated profit to the extent of Rs. 3,21,173. The Appellate Assistant Commissioner submitted a report holding that all the conditions in Section 23A, Explanation 1, Clause (b) of the Act, are satisfied and that, therefore, the public are substantially interested. He also held that the sum of Rs. 3,21,173 represented accumulated profits. The Tribunal concurred with the finding of the Appellate Assistant Commissioner on all the issues. At the instance of the Commissioner of Income-tax, the following three questions have been referred by the Tribunal:
'1. Whether, on the facts and in the circumstances of the case, the company called Vijayakumar Mills Ltd. was a company in which the public were substantially interested within the meaning of Section 23A of the Indian Income-tax Act, 1922 ?
2. Whether, on the facts and in the circumstances of the case, the sum of Rs. 3,21,173 could be treated as dividend under Section 2(6A)(e) of the Indian Income-tax Act, 1922 ?
3. Whether the whole of the amount standing to the credit of reserve for development rebate would form part of the accumulated profits within the meaning of Section 2(6A)(e) of the Indian Income-tax Act, 1922 ?'
7. Though the assessee did not file any independent application under Section 256, in the application filed by the Commissioner he asked for a reference by way of a counter certain questions and overruling the objections of the department for such a reference, the following two questions have been referred at the instance of the assessee:
'1. Whether the excess in the development rebate reserve over the statutory reserve created under the Income-tax Act was part of the accumulated profits of the company within the meaning of Section 2(6A)(e) of the Income-tax Act ?
2. Whether the sum standing to the credit of the reserve for redemption of preference shares was part of the accumulated profits of the company within the meaning of Section 2(6A)(e) of the Act ?'
8. In order to attract the provisions of Section 2(6A)(e) the payment shall be by a company, not being a company in which the public are substantially interested within the meaning of Section 23A. Explanation 1 to Section 23A defines the expression ' company in which the public aresubstantially interested'. We are not concerned with Clause (a) of that Explanation, Clause (b) prescribes four conditions. Unless all these four conditions are satisfied, the company shall not be deemed to be a company in which the public are substantially interested. The four conditions are:
1. The company should not be a private company as defined in the Companies Act, 1956.
2. Its shares, other than shares entitled to a fixed rate of dividend, whether with or without a further right to participate in profits, carrying not less than fifty per cent. of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the previous year beneficially held by the public. This fifty per cent. which shall be regarded as held by the public is reduced to 40 per cent. in the case of Indian companies whose business consists wholly in the manufacture or processing of goods.
3. The shares of the class mentioned in condition (2) were either subject matter of dealings in the previous year in any recognised stock exchange in India or freely transferable by the holder to other members of the public.
4. The affairs of the company or the shares of the company carrying more than 50 per cent. of the total voting power were at no time during the previous year controlled or held by less than six persons.
9. A reading of the section, in particular the use of the conjunction 'and' after Clause (b) and before Clause (bi) and after Clause (bii) and before Clause (biii) clearly shows that all these four conditions are cumulative and not alternative and unless all the four conditions are satisfied, the company shall not be deemed to be a company in which public are substantially interested. It has also been so held in Indian Steel & Wire Products Ltd, v. Commissioner of income-tax : 62ITR334(Cal) . So in order to answer the first question referred to us at the instance of the revenue, we have to find out whether the company satisfies all the conditions. But before we do so, with reference to the facts of this case, it would be useful if we refer to one or two cases dealing with the scope of the condition prescribed in Clause (bi) of the Explanation 1 to Section 23A. We may add that there is no dispute on the first condition, namely, that it is not a private company as defined in the Companies Act. It is a public limited company.
10. In Raghuvanshi Mills Ltd. v. Commissioner of Income-tax,  41 ITR 613 .the Supreme Court had occasion to consider the meaning of the words, shares allotted 'unconditionally' and 'beneficially', in the Explanation to Section 23A as it stood prior to the amendment in 1955. The amendment is not relevant for the purpose of the present consideration. The Supreme Court held:
'The essence of the Explanation lies not in the percentage which only shows the limit of the minimum holding by the public, but lies in the words 'unconditionally' and 'beneficially'. These words underline the fact that no person who holds a share or shares not for his own benefit but for the benefit of another and who does not exercise freely his voting power, can be said to belong to that body, which is designated 'public'. The word 'public' is used in contradistinction to one or more persons who act in unison and among whom the voting power constitutes a block. If such a block exists and possesses more than seventy-five per cent. of the voting power (now 50 per cent.), then the company cannot be said to be one in which the public are substantially interested.'
11. The Supreme Court further held ;
' The test is first to find out whether there is an individual or a group which controls the voting power as a block. If there be such a block, the shares held by it cannot be said to be 'unconditionally ' and ' beneficially' held by members of the public.'
12. These principles were again affirmed in Commissioner of Income-tax v. East Coast Commercial Co. Ltd. : 63ITR449(SC) .and the Supreme Court further observed :
'It is clear that in deciding whether an order under Section 23A(1) is called for, the Income-tax Officer must determine: (i) whether there is an individual or a group which can control the voting power as a block. The existence of such a block may be established by showing that the voting power is vested in persons possessing more than fifty per cent. of the shares issued who act in concert; and (ii) that the block exercises a controlling interest over the affairs of the company. This condition is satisfied only if the voting power of the block or group is seventy-five per cent. or more. If the block holds seventy-five per cent. of the voting power, it shall be deemed that the company is one in which the public are not substantially interested. On the other hand, if the members of the public hold 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 allotted unconditionally to, or acquired unconditionally by, them, the company shall be deemed to be one in which the public are substantially interested.'
13. The percentage referred to in this decision also is with reference to the provision as it stood prior to the amedment of Section 23A in 1955. As noted already, the equity shares of this company are 12,000 carrying one vote for every share. The total number of shares in the possession of the directors and their near relations including those registered in the name of Travancore Forward Bank Ltd. amount to 6,834. The remainingshares out of 12,000 held by the public, therefore, would be less than 50 per cent.
14. The first point that arises for consideration, therefore, is whether the 1,328 equity shares held in the name of Travancore Forward Bank Ltd. should be deemed to have been held by the public or by G. Krishnan, one of the members of the controlling group. As already noticed, the shares held by the Travancore Forward Bank Ltd. are the shares pledged by G. Krishnan. In the register of members of the company, the name of the bank appears as the holder of the shares. But the dividend income from these shares were returned by G. Krishnan in his income-tax assessment. The argument of the learned counsel for the revenue is that these shares shall not be treated as having been allotted unconditionally to or acquired unconditionally by the bank and beneficially held by the bank. The learned counsel for the assessee, on the other hand, contended that the shares stand registered in the name of the bank, that the bank is entitled to freely exercise its voting power and that, therefore, the shares are unconditionally and beneficially held by the public. We think that the learned counsel for the assessee is well-founded in his contention. The position of a mortgagee or a pledgee of shares is clearly explained in the following passage in Gower's Principles of Modern Company Law at page 411:
'Shares, being items of property can, of course, be disposed of by way of security for a loan as well as sold outright. It follows from what has already been said that the security can be a legal mortgage only if the mortgagee is entered on the register, and that this can only be done if there is an outright transfer to him. Hence, a legal mortgage involves a registered transfer which, for the protection of the borrower, should be coupled with a written agreement setting out the terms and containing an undertaking by the lender to retransfer when the borrower redeems by repaying the principal, interest and costs.'
15. When once the share is registered in the name of the mortgagee, it is the mortgagee who can exercise the vote. The mortgagor or the pledger had no right either to vote or control or direct the voting by the mortgagee. Even in cases where the name of the pledger of the share continued to be the holder of the pledged shares in the books of the company, the pledger is bound to vote according to the directions of the pledgee bank. This position is also supported from the following passage in the Hand Book on Formation, Management and Winding up of Joint Stock Companies by Sir Francis Gore-Browne (29th edition) at page 425:
' Where an agreement for the sale of shares has been made, or where shares are mortgaged but the vendor's or mortgagor's name remains on the register of members, he alone can vote, but he must do so in accordancewith the dictation of those entitled to the beneficial interest in the shares unless it is otherwise agreed.'
16. We are, therefore, of the view that the 1,328 shares held by the bank shall be deemed to have been allotted unconditionally to or acquired unconditionally and held beneficially by the public.
17. The learned counsel for the assessee also contended that the company's business consists wholly in the manufacture or processing of goods and that, therefore, it is enough if the percentage of equity shares required to be held by the public is 40 per cent. If this contention is correct, then even if 1,328 shares standing in the name of the bank were to be taken as held by the controlling group, still the second condition for holding that the company is a company in which the public are substantially interested is satisfied. The main business of the company was manufacture and sale of yarn. In 1959 it sold besides yarn, cotton worth Rs. 17 lakhs, as being not required for its immediate use after obtaining the permission of the Textile Commissioner. It is contended by the assessee that it was not the business of the company to sell cotton and it was not dealing in cotton except for the purpose of its own consumption and whatever cotton that was not required for the purpose of the company only was sold. On the other hand, the learned counsel for the revenue laid strong emphasis on the word 'wholly' and contended that unless the business of the company consists wholly in the manufacture or processing of goods, it could not be said to be a company within the meaning of that condition. We are of the opinion that too much emphasis should not be placed on the word 'wholly' though the significance of that word also should not be ignored. It may also be mentioned that in the definition of 'company in which the public are substantially interested' in Section 2(18) of the Income-tax Act, 1961, the word 'wholly' is replaced by the word 'mainly'. In all businesses, at certain times, part of the raw materials purchased may have to be sold as being not suitable or of inferior quality or on the ground that they could not be used for immediate purposes of the company. There may be very many circumstances, which it is difficult to set out in detail in which the company may be forced on commercial expediency to dispose of raw materials. From that fact alone it should not be said that they are dealers or doing business in selling those raw materials. In this case, the finding of the Tribunal and the Appellate Assistant Commissioner is that Rs. 17 lakhs worth of cotton sold represented only the cotton that was not required for the business of the company and it was sold after getting the express permission of the Textile Commissioner. We are, therefore, of opinion that the company's business is manufacture and sale of yarn and that, therefore, it comes within the proviso to Explana-tion I(bi). It that is so, even if these 1,328 shares held by the TravancoreForward Bank Ltd. are to be treated as not held by the public, the second condition is satisfied.
18. The Appellate Assistant Commissioner and the Tribunal have found that the equity shares of the company were the subject-matter of dealings in the Madras Stock Exchange and the company had not at any time in the year 1959 refused registration of the transfer of any shares. But the learned counsel for the revenue, relying on one of the articles of association of the 'company which empowered the directors to refuse without assigning any reason to register a share in favour of any person they consider undesirable, contended that the shares were not freely transferable by the holders to the other members of the public and, therefore, the third condition is not satisfied. This court in East India Corporation Ltd. v. Commissioner of Income-tax : 61ITR16(Mad) has held that the words 'are in fact freely transferable' in Section 23A do not mean that there should necessarily be actual transfers of shares, but that there should be a factual tendency towards free transfer of shares by holders to other members of the public subject to reasonable restrictions. This court also considered a clause in the articles of association similar to the one which is now relied on by the learned counsel for the revenue and held :
'It is true, Clause 13 vests in the directors absolute power to accept or not to accept applications for transfer of shares. Nevertheless, it is not to be suspected or assumed, to begin with, that the discretion vested in the board of directors will be misused so as to achieve an ulterior purpose. Facts may, however, appear on which it will be possible to find no misuse of power in that way. But the point is that from the mere fact of absolute discretion being vested in the board of directors it cannot be concluded that the shares in fact are not freely transferable. A contrary view would appear to have been taken by the Calcutta High Court in Commissioner of Income-tax v. Tona Jute Company Ltd. : 48ITR902(Cal) . With respect, we are of the view that, without further facts and circumstances, which will warrant a conclusion that shares are in effect not transferable, it will be neither wise nor right to lay down as a general proposition that wherever a clause like Clause 13 here occurs in the articles of association, the shares must be taken to be not freely transferable.'
19. In this connection, we may also refer to a passage from Kanga and Palkhivala on Income-tax, 6th edition, volume 1, page 650, which is apposite and reads as follows:
'In Commissioner of Income-tax v. Tona Jute Co. Ltd.a, the Calcutta High Court held that shares were not freely transferable to other members of the public because the articles of association of the company empowered the directors to refuse, without assigning any reason, to register transferof a share in favour of a person whom they consider undesirable. The decision, is it is submitted, incorrect, and was dissented from by the Madras High Court in East India Corporation Ltd. v. Commissioner of Income-tax. (A similar point was raised before the Bombay High Court in some writ petitions and the department agreed to regard shares as freely transferable in such cases). Shares must be treated as freely transferable if any agreement or the articles of the company do not restrict the shareholder's right to transfer the shares, and the right to transfer the shares cannot be said to be restricted merely because the directors of the company have discretion to refuse to register transfer of shares in favour of a person whom they consider undesirable. The articles of public companies must always contain a provision conferring such discretion and it cannot be said that in such cases the public companies restrict the right to transfer their shares. Such restriction is really an attribute of a private company and not of a public company as is made clear in Section 3(1)(iii) of the Companies Act, 1956.'
20. It may also be pointed out that no instance has been brought to the notice of any of the authorities below wherein such a refusal has taken place during the accounting year. We respectfully agree with the decision in East India Corporation Ltd, v. Commissioner of Income-tax, and hold that the mere provision in the articles of association of the company conferring a discretion on the directors to refuse without assigning any reason to register a transfer of the shares does not warrant the conclusion that the shares are not freely transferable to the members of the public. We are, therefore, clearly of opinion that this third condition is also satisfied.
21. It is seen from Sub-clause (biii) of Explanation I to Section 23A, that two tests are provided in order to determine whether the control of the company is vested in less than six persons. Firstly, if the affairs of the company at any time during the previous year were controlled by less than six persons the company would be regarded as a controlled company and not a company in which the public are substantially interested. Secondly, if the shares carrying more than 60 per cent. (since this is an Indian company whose business consists solely in the manufacture and processing of goods) of the total voting power were at any time during the accounting year held by less than six persons, it would be a controlled company. This clause, therefore, seeks to impose two distinct and separate conditions. Therefore, unless both the conditions are satisfied, the company would not be one in which the public are substantially interested. The number of directors during the accounting year was six. Of these, four were father and his three sons, and therefore they have to be treated as a single person as they come within the definition of the word 'relative' in Section 23A,Explanation I, Clause (biii), and that makes the number of directors of the company three. It is not the case of the revenue that these directors have any special power under the articles of association which enable them to control the company, though they do not possess more than 50 per cent. of the voting power. There is no other evidence or material from which it could be stated that the affairs of the company were at any time during the previous year controlled by these three directors. The control is normally exercised by voting power. The learned counsel for the revenue submitted that the control of the affairs of the company is ordinarily in the hands of the directors of the company and that since the number of directors in this case is less than six this condition is not satisfied. We are unable to accept this contention. Unless it is shown that though the number of directors is less than six, they have a direct or indirect control over more than 50 per cent. of the voting power, the company could not be said to be a controlled company. In fact, according to Section 252 of the Indian Companies Act, the minimum number of directors prescribed for a public limited company is only three. If the argument of the learned counsel for the revenue is to be accepted, then in all cases of public limited companies where the number of directors is less than six, the company will automatically have to be held as one in which the public are not substantially interested. In Commissioner of Income-tax v. Jubilee Mills Ltd. : 48ITR9(SC) the Supreme Court observed :
' The control of the affairs of the company is ordinarily in the hands of the directors of the company but there may be cases in which the managing agents, by reason of their superior holding of shares, may be able to appoint the directors and generally to control the views of the directors. Where the managing agents hold the interest which is small and thus not capable of exercising an overriding power, other evidence may be required to show that they, in conjunction with others, are running the affairs of the company to the exclusion of the public. Where, however, the managing agents admittedly hold 51 per cent. or more of the shares, it is obvious that the controlling interest belongs to the managing agents. When such a body holds shares carrying more than 75 per cent. of the voting power, the company itself is run mainly as the managing agents desire it to be run. Such a managing agency could easily choose its own directors and the directors would not be independent persons but mere nominees of the managing agents......When this happens the companycomes within the reach of Section 23A.'
22. In this connection it is useful to refer to Commissioner of Income-tax V. H. Bjordal, [1955) 28 ITR 25. That was a case under the Income-tax Ordinance, 1940,Uganda. The Privy Council considering a similar provision made the following observation with reference to the control of the affairs of the company :
'For the purposes of a decision upon the arguments addressed to them, their Lordships are of opinion that 51 should be adopted as the figure of percentage requisite to confer a controlling interest. A member or a group of members holding 51 per cent. of the voting power would succeed in fulfilling his or their wishes with regard to the ordinary resolutions which come up before meetings of shareholders. They would generally have a dominant voice in the election of the directors when such elections fell due. Although they would not be able without support from others to secure the passing of a special resolution, nevertheless they would be able to resist a special resolution which was not in accordance with their wishes. They would be able generally to control the company, though their capacity to do so would not be as ample as that accompanying the possession of 75 per cent. of the voting power,'
23. As we have already seen, no special power under the articles of association which enabled the director to control a company is relied on by the learned counsel for the revenue.
24. The company had 8,000 preference shares and 12,000 equity shares carrying equal voting rights and one vote for each share. We have already held that the directors and their relations noted above were holding only 5,506 equity shares and the remaining 6,494 equity shares belong to the members of the public. In regard to preference shares, it has been found by the Tribunal that only 210 shares belonged to the controlling group and as such the remaining 7,790 preference shares belong to the public. Taking both the categories of shares together, out of the 20,000 shares, 14,284 shares are held by the public who are persons other than those forming the controlling group. Thus, the controlling group holds only very much less than 50 per cent. of the total voting power. We, therefore, hold that the fourth condition is also satisfied.
25. All the conditions have been cumulatively satisfied, the company is one in which the public are substantially interested within the meaning of Section 23A of the Indian Income-tax Act, 1922.
26. The second question is covered by our judgment in Govindarajulu Naidu v. Commissioner of Income-tax : 90ITR13(Mad) . In that case, the assessee family held 3,300 partly paid up shares in a private limited company. Towards the first and second call money amounting to Rs. 1,65,000 the company debited the account of the assessee and the call monies have been treated as having been paid. This transaction by which a debit entry has been made against the assessee towards the call monies of Rs. 1,65,000 due byit and a credit entry made in favour of the company in relation thereto, was treated by the Income-tax Officer and Tribunal as a loan transaction by the company to the assessee family and the sum of Rs. 1,65,000 was treated as advance within the meaning of Section 2(6A)(e). There was no cash payment of that sum but it was only a book adjustment in the company's account under which the assessee became a debtor and the company became a creditor. The question for consideration was whether the view of the Tribunal that this sum of Rs. 1,65,000 was advance of loan made by the company to the assessee and that attracted the application of Section 2(6A)(e) was correct. It was held that in order to attract Section 2(6A)(e) there should be an actual cash advance or loan from the company to the assessee and the mere creation of a debtor and creditor relationship between the company and the assessee will not be enough. There should be an outgoing or flow of money from the company to the shareholders. In the present case, the finding of the Appellate Assistant Commissioner and the Tribunal is that Rudrappan had criminally misappropriated the funds of the company, that the other partners of the managing agents were not aware of the acts of Rudrappan, that there were no entries in the books of the company relating to these transactions and that, therefore, the sum of Rs. 4,50,000 did not represent any payment by way of loan or advance, by the company to the assessee. We are in entire agreement with this finding. The director or shareholder helping himself out of the money of the company cannot be treated as lending or advancing. The company did not pay and unless there is an actual payment by the company as a loan or advance to the assessee it could not be treated as dividend under Section 2(6A)(e).
27. The third question is also covered by our decision in G. Ramaswami Naidu v. Commissioner of Income-tax : 86ITR768(Mad) wherein we have held that the development rebate reserve would form part of the accumulated profits.
28. For the foregoing reasons we answer the first and second questions against the revenue. The third question is answered in the affirmative and against the assessee.
29. So far as the two questions referred to at the instance of the assessees are concerned, we have to state that they have not been properly referred and, therefore, we return the reference unanswered. This court in Commissioner of Income-tax v. K. Eathnam Nadar : 71ITR433(Mad) has held that where either the Commissioner or the assessee has made the application under Section 66(1) of the Indian Income-tax Act, 1922, it is not open to the other party in reply to the application filed by the opposite party to ask for reference of a question which it wants to be referred. The only way by which a party can ask for a reference of any question to the High Court is by filing anapplication under Section 66(1) and, if that is refused, to apply to the High Court under Section 66(2). Therefore, we have to hold that the reference is not properly before us and accordingly we return the reference unanswered.
30. The assessee will be entitled to his costs. Counsel's fee Rs. 250.