Sabyasachi Mukharji, J.
1. This reference under Section 256(1) of the Income-tax Act, 1961, relates to the assessment years 1958-59, 1961-62 and 1962-63. We are concerned here with the application of Section 23A of the Indian Income-tax Act, 1922, for the first two years and Section 104 of the Income-tax Act, 1961, for the last year. The question involved in this reference is whether the company can be deemed to be one in which the public were substantially interested within the meaning of the provisions of the aforesaid sections referred to hereinbefore. The relevant provisions of Section 23A of the Indian Income-tax Act, 1922, was Clause (b) of Explanation 1 of Section 23A which was as follows :
'Explanation 1.--For the purposes of this section, a company shall be deemed to be a company in which the public are substantially interested--......
(b) if it is not a private company as defined in the Indian Companies Act, 1913 (VII of 1913), and......
(iii) the affairs of the company or the shares carrying more than fifty per cent. of the total voting power were at no time during the previous year controlled or held by less than six persons, and in computing the number of six persons aforesaid, the Government or any corporation established by a Central, State or Provincial Act or a company to which the provisions of this section do not apply shall not be taken into account, and persons who are relatives of one another and persons who are nominees of any other person together with that other person shall be treated as a single person, the expression ' relative ' in this context meaning husband, wife, lineal ascendant or descendant, brother or sister :......'
2. Similar in law is the position for the assessment year 1962-63 for which the provisions of Section 104 of the Income-tax Act, 1961, have also to be guided by identical considerations. The Income-tax Officer found that in the caseof the assessee the number of shares issued and subscribed was 1,50,000 inrelation to the assessment year 1958-59. Out of this, the Income-taxOfficer found that 80,210 shares were held by the following persons:
Sl. No.Name of shareholderNo. of shares held
1.Sri Jagmohan Prasad Goenka 21,2002.(i)Sri K. P. Goenka 800 (ii)M/s. R. P. Goenka & Ors.15,000 (iii)Smt. Sushila Devi Goenka10,000 (iv)Sri Jagadish Pd. Goenka 10
25,8103.(i)Sri Narain Pd. Goenka 500 (ii)Smt. Puspa Devi Goenka10,000
10,5004.Sri Devi Prasad Goenka 12,2005.Sri Nabin Chandra Raya 10,500
3. Shri R. P. Goenka and Jagadish Prosad Goenka are brothers and sons of Shri K. P. Goenka. Smt. Sushila Devi Goenka is the wife of Shri R. P. Goenka. As a consequence of this, according to the Income-tax Officer, for the assessment year 1958-59, the company could not be deemed to be one in which the public were substantially interested because it did not satisfy the conditions specified in Sub-clause (iii) of Clause (b) of Explanation 1 of Section 23A of the Indian Income-tax Act, 1922, to which we have referred before. The position of shareholding is deemed to be the same in respect of the two assessment years 1961-62 and 1962-63. The law applicable for the said assessment year 1961-62 was the same as that for 1958-59. For the assessment year 1962-63, the corresponding provisions of the Income-tax. Act, 1961, read with Section 2(18)(b)(iii) and 2(41), which were in identical terms, were considered by the Income-tax Officer. The Income-tax Officer, therefore, levied additional super-tax for all the three assessment years in question inasmuch as the dividends distributed fell short of the statutory percentage. We need not refer to the actual amount distributed and how it fell short because this point is not in dispute before us.
4. The assessee preferred appeals before the Appellate Assistant Commissioner and submitted that shareholdings in the name of K. P. Goenka, Sushila Devi Goenka and Jagadish Prosad Goenka could hot be clubbed with the shares held in the name of M/s. R. P. Goenka. The Appellate Assistant Commissioner, following the decision of his predecessor for the assessment year 1960-61, negatived the contention made by the assessee.
5. The assessee preferred appeals before the Tribunal. For the year1960-61, the assessee's plea before the Tribunal was that since the shareholding in the name of R. P. Goenka constituted shareholding of the Hinduundivided family of which R. P. Goenka was the karta, such shareholdingcould not be clubbed with the shareholding of K. P. Goenka, Sushila DeviGoenka and Jagadish Prosad Goenka who are separate individuals. TheTribunal found that the shares in question stood registered in the name ofM/s. R. P. Goenka & Ors. and the name of the registered shareholder didnot contain any further description such as karta of the Hindu undividedfamily, etc., nor did the names of any other persons figure. The Tribunal,therefore, held that the persons whose shareholdings had been clubbedtogether were relatives within the meaning of that expression as appearingin the Indian Income-tax Act, 1922, and, therefore, Section 23A wasattracted. In the common order of the Tribunal for the years under consideration the Tribunal has further found that there was no evidence insupport of the contention of the assessee that the members of the purportedassociation were specific and there was no evidence to show that the membership of the purported association could be gathered from the records ofthe company in which the shares were held. The Tribunal found that theregistered shareholder was M/s. R. P. Goenka & Ors. and the name was-asingle one. The Tribunal, therefore, upheld the order of the AppellateAssistant Commissioner. In the premises, the Tribunal has referred threequestions for the three different years which are in identical terms for theassessment years 1958-59, 1961-62 and 1962-63. The questions are asfollows:
Assessment year 1958-59:
'Whether, on the facts and in the circumstances of the case, theTribunal was right in holding that the assessee-company was not a company in which the public are substantially interested within the meaningof Clause (b) of Explanation 1 to Section 23A of the Indian Income-taxAct, 1922, inasmuch as the shares carrying more than 50% of the votingpower were during the previous year held by less than six persons
Assessment year 1961-62:
'Whether, on the facts and in the circumstances of the case, theTribunal was right in holding that the assessee-company was not a companyin which the public are substantially interested within the meaning of Clause (b) of Explanation 1 to Section 23A of the Indian Income-tax Act,1922, inasmuch as the shares carrying more than 50% of the voting powerwere during the previous year held by less than six persons ?'
Assessment year 1962-63:
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee-company was not acompany in which the public are substantially interested within the meaning of Sub-clause (iii) of Clause (b) of Section 2(18) read with Section 2(41) of the Income-tax Act, 1961, inasmuch as the shares carrying more than 50% of the voting power were during the previous year held by less than six persons ?'
6. Before us two contentions were raised. It was contended that M/s. R. P. Goenka & Ors. were not capable of holding shares and as such of exercising voting rights and, therefore, the shareholdings of M/s. R. P. Goenka & Ors. should be excluded and if the same were excluded, the number of shares held by these persons who had been clubbed together would come to less than 50% of the shareholdings, In support of this contention, counsel for the assessee contended that under the provisions of the Companies Act, read with Table 'A', regulations 25-28, the company was not competent to recognise a joint entity which was not a legal entity like M/s. R. P. Goenka & Ors. In the premises, according to counsel for the assessee, these shares were neutralised as such and they had no voting rights. In support of the contention counsel for the assessee drew our attention to the decision in the case of Vagliano Anthracite Collieries Ltd., In re  WN 187. That was a motion by one Thomas Blair and one William Blair Girling who had carried on business as solicitors in partnership. They asked that the registrar of members of the company should be rectified by entering their names thereon in respect of 250 fully paid-up shares in the capital of the company, then registered in the name of one Mrs. Cookson. The applicants were the holders as transferee of the shares in question from Mrs. Cookson. The transferees were expressed upon the face of the transfer to be Messrs. Blair & W. B. Girling and it was purported to be executed by Blair & W. B. Girling, the firm name, as transferees. The company had refused to register the transfer on the ground that they were not bound to enter the name of the firm on the register except by naming the members. When the motion came up for hearing the learned judge held that the application failed because the applicant's firm was not a person. A firm was not a person nor a legal entity at all. In the premises, the application was refused. It follows, therefore, that the joint transferees or holders have no legal right to have themselves registered in the company's register as joint transferees or to have their names entered into in the firm's name or in the name of the association of persons or of a Hindu undivided family. In support of this proposition we may refer to the decision of the Supreme Court in the case of Commissioner of Income-tax v. Shakuntala : 43ITR352(SC) , where it was held that a Hindu undivided family which was the beneficiary of certain shares in a company in which the public were not substantially interested held the shares in the names of different members of the family. The Income-tax Officer applied the provisions of Section 23A of the Indian Income-tax Act, 1922, and passed an order that the undistributed portion of the distributable income of the company should be deemed to have been distributed and the amount appropriate to the shares of the family were sought to be included in the income of the family. It was held that the expression 'shareholder' in Section 23A of the Indian Income-tax Act, 1922, meant the shareholder registered in the books of the company. The amount appropriate to the shares had been included in the incomes of the members of the family in whose names the shares stood in the register of the company and as the Hindu undivided family was not a registered shareholder of the company, the amount could not be assessed as the income of the family under Section 23A of the Act. In the case of Commissioner of Income-tax v. C.P. Sarathy Mudaliar : 83ITR170(SC) it was held by the Supreme Court that Section 2(6A)(e) of the Indian Income-tax Act, 1922, should receive a strict construction and when the section spoke of 'shareholder', it referred to the registered shareholder and not to the beneficial owner. In that case members of a Hindu undivided family had acquired shares in a company with the funds of the family. Loans were granted to the Hindu undivided family and the question was whether the loans could be treated as dividend income of the family falling within Section 2(6A)(e) of the Indian Income-tax Act, 1922. It was held by the Supreme Court that only the loans advanced to the shareholders could be deemed to be dividends under Section 2(6A)(e). The Hindu undivided family could not be considered to be a 'shareholder' under Section 2(6A)(e) and, hence, the loans given to the Hindu undivided family could not be considered as loans advanced to a shareholder of the company and could not, therefore, be deemed to be its income. The position, therefore, is that, in the eye of law, M/s. R. P. Goenka & Ors. could not have been registered as shareholders but the fact is that they had been so registered. The law provides that if they were so registered, the company would suffer certain consequences as provided in Section 150 of the Companies Act, 1956. Counsel for the assessee contended that inasmuch as the shares could not have been registered in such name there would be no voting right attached to the shares. It was contended that when a registered shareholder died but mutation of the names of the heirs and legal representatives of his heirs did not take place, the shareholding did not carry any voting right. We are, however, unable to accept the position that where a registered shareholder died and the name or names of the heir or heirs were not mutated, nobody could be considered to be a shareholder having voting right. It cannot be said, in our opinion, that there was no voting right upon the registration of the shares. How the voting right on behalf of the shareholders would be exercised is a matter of internal arrangement between the shareholders. In the premises, it cannot be saidthat Messrs. R. P. Goenka & Ors. could not be considered to be a shareholder and should be left out of consideration.
7. The next contention of counsel was that even if shares in the name of M/s. R. P. Goenka & Ors. were taken into consideration, the relationship did not fulfil the requirements of the provisions of the Act. We have noted the definition of Sub-clause (iii) of Clause (b) of Explanation 1 of Section 23A of the Indian Income-tax Act, 1922. It requires that shares of the company or the affairs of the company should be controlled or held by less than six persons and in computing the number of six persons the Government or any other corporation established by a Central, State or Provincial Act or a company to which the provisions of this section did not apply shall not be taken into account. It further provides that the persons who are relatives of one another shall be treated as a single person. Relative, again, has been defined in this sub-clause as meaning husband, wife, lineal ascendant or descendant, brothers and sisters. Therefore, the person must be related with 'one another' by the relationship as indicated in the said definition. Section 23A, therefore, requires not only that one must be related to the other ; the other must be related to the next person. Each must be related to the other in view of the expression 'one another'. In this case, therefore, it is necessary to find out if the persons in the serial number 2 of shareholding, i.e., Sri K. P. Goenka, M/s. R. P. Goenka & Ors., Smt. Sushila Devi Goenka and Sri Jagadish Pd. Goenka, can be said to be related to one another in terms of the definition provided in the Explanation to the section. R. P. Goenka and Jagadish Pd. Goenka are brothers. Therefore, they are related to each other. K. P. Goenka is also related to R. P. Goenka as being the father of the son. Smt. Sushila Devi Goenka is not related either to Sri K. P. Goenka or to Sri Jagadish Pd. Goenka in terms of the definition because Sushila Devi is neither the husband nor the wife nor lineal ascendant or descendant or brother or sister either of Sri K. P. Goenka or Sri Jagadish Pd. Goenka. Counsel for the revenue contended that in this connection we must first construe the expression 'relative' as a joint terminology and then find out if any of them is related to the other by the said meaning given in the definition. We are, however, unable to accept this argument for two reasons. Firstly, the section clearly enjoins that relationship must be between one another mentioned in the section. When the expression 'relative' has been defined, it is not proper to construe the relationship by some other notion because there cannot be two different meanings to the same expression used in the Explanation. We have to remember further that it is not only a fiscal measure but is penal in nature as has been held by the Supreme Court. Therefore, this expression must receive strict construction. We are aware of the fact that this construction leads to certain amount of anomaly andabsurdity. It will be a strange thing to say that sister-in-law or daughter-in-law would not be related to each other. But we have to find out the meaning given in the section. In the aforesaid view of the .matter we are of the opinion that on this aspect of the matter counsel for the assessee is right and if Smt. Sushila Devi Goenka's shares go out and if Smt. Sushila Devi Goenka is considered to be another individual, then the position becomes different. Therefore, the mischief of the section cannot be applied to this company.
8. In the aforesaid view of the matter we answer each of the questions for the three years in the negative and in favour of the assessee. In the facts and circumstances of the case, each party will pay and bear its own costs.
R.N. Pyne, J.
9. I agree.