Sankar Prasad Mitra, C.J.
1. This is a reference under Section 256(1) of the I.T. Act, 1961. It arises out of proceedings under Section 104 of the I.T. Act, 1961, for the assessment years 1963-64 and 1964-65, the relevant previous years ending on March 31, 1963, and March 31, 1964, respectively.
2. Section 107 deals with super-tax on undistributed income of certain companies. Section 108 provides, inter alia, that nothing in Section 104 shall apply to any company in which the public are substantially interested.
3. In order to find out what is meant by ' company in which the public are substantially interested' one has to go to Section 2(18). The portions of Section 2(18) relevant for our purposes are as follows :
' company in which the public are substantially interested '-
A company is said to be a company in which the public are substantially interested-
(b) If it is not a private company as denned in the Companies Act, 1956 (1 of 1956), and
(i) its shares......
carrying not less than fifty per cent, of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous years beneficially held by......the public(not being a director, or a company, to which this clause does not apply),'
The assessee, in the instant reference, is a company with the issued, subscribed and paid-up capital of 12,500 ordinary shares of Rs. 100 each. The said shares were held as follows:
'A.INDIVIDUALSNo. of shares Shri Gokul Chand Bangur600 Smt. Kamala Devi800 ' Rajkumari Devi800 ' Ganapati Devi800 ' Chandra Devi200 ' Panna Devi800
4,000B.TRUSTS M/s. Ramnivas Bangur Majali
Trustees of Mugneeram
Charitable Trust800 M/s. Gobindlal Bangur
and Gokul Chand Bangur,
Trustees of Bangur
Charitable Trust800 M/s. Gokulchand Bangur
& Narsingdas Bangur,
Trustees of P. D. Bangur Trust.800
2,400C.Companies in which public are not substantially Interested...6,100
The following are the figures on the basis of which Section 104 was applied :
Rs. Rs. Rs.
Total income 2,45,253 2,47,338
Less: I.T. & S.T. 72,529 58,053
Donations 25,000 97,529 Nil. 58,053
Balance distributable 1,47,724 1,89,285
Minimum dividend that should
have been distributed 1,32,952 1,70,355
Dividend declared 37,500 1,25,000
Shortfall 95,452 45,355'
The ITO levied additional super-tax of Rs. 55,112 and Rs. 32,141.50, respectively.
The AAC found that-
' (a) the shares were quoted on the Calcutta Stock Exchange, and
(b) the affairs of the company or the shares carrying more than 50% of the voting power were at no time, during the relevant previous years, controlled or held by five or less persons.'
The AAC then went into the question whether trusts could be taken as members of the public. He said : ' It is not really the shareholders who are registered in the share register but the beneficial owners of the shares who have to be considered. Undoubtedly, the beneficial owners are the trusts. The charitable trusts are public bodies and the income in their hands have been held to be exempt from taxation. The representative has cited the decision of the Tribunal's Calcutta Bench in the case of Bangur Bros. Ltd., where the Tribunal has held that Mugneeram Ramcoo-war Bangur Charitable Trust is a member of the public. In view of the circumstances stated above, I hold that the ITO was not justified in saying that the trusts cannot be considered as members of the public. In my opinion, trusts are members of the public and, therefore, the assessee is a company in which the public are substantially interested.'
4. Before the Tribunal, the department submitted that the trusts and companies in which public were not substantially interested should be excluded from the public and if this was done there was no participation, in the instant case, by the public to the extent of 50% of the shareholding as envisaged by Section 2(18)(b) of the I.T. Act of 1961.
5. The assessee's counsel urged that the matter was concluded by the Tribunal's order in ITA No. 9158 of 1959-60 and the said order should be taken as affirmed by the Supreme Court as the reference application filed against it had failed right through, including before the Supreme Court. The assessee's counsel submitted that the trusts were public charitable trusts and, hence, constituted the public, with 4,000 shares held by various individuals, 2,400 shares by the public and 6,100 shares by companies in which the public were not substantially interested.
6. The Tribunal referred to the Supreme Court decision in Raghuvanshi Mills Ltd. v. CIT : 41ITR613(SC) , and other decisions following it and held that the word ' public ' was used in contradistinction to one or more persons in unison and among whom the voting power constituted a block. In the present case, according to the Tribunal, if the individuals were taken as constituting a block, they did not have a controlling interest. It was only in combination with the trusts that there could be a controlling interest. It was thus necessary to see whether the shares held by the trusts could be treated as those held by the public. The Tribunal cameto the conclusion that the trust-shares would not be shares held by the public. The Tribunal held that the assessee was one in which the public were not substantially interested.
7. The following question of law has been referred to us :
' Whether, on the facts and in the circumstances of the case, the assessee-company was one in which the public were substantially interested within the meaning of Section 2(18), read with Section 104 of the I. T. Act, 1961 '
We have heard elaborate arguments on behalf of both the parties. Our attention was drawn to the cases reported as CIT v. Jubilee Mills Ltd. : 48ITR9(SC) , CIT v. G. Venkataraman : 101ITR673(Mad) , CIT v. Amrutanjan Ltd. : 53ITR218(SC) , IRC v. Park Investments Ltd.  43 TC 200 ;  2 All ER 785, Morrisons Holdings Ltd. v. IRC  43 TC 176 ;  1 All ER 789 .
8. It would not be necessary to go into these cases for the purpose of deciding this reference. On behalf of the department, Mr. Balai Pal has contended that the question referred to turns mainly on the construction of Section 2(18) of the I.T. Act, 1961. This provision should be construed on its plain language without taking into consideration whether that construction would create hardship for any possible case.
9. Whatever may be the scheme, says Mr. Pal, underlying the enactment of Section 23A of the Act of 1922 or Section 104 read with Section 2(18) of the Act of 1961, it is the language of the respective provisions which has to be given effect to. Section 2(18)(b)(i) lays down :
(a) that the shares of the company (which claims to be a company in which the public are substantially interested) carrying not less than 50% of the voting power have been unconditionally allotted to or unconditionally acquired by the public (the word 'public' excludes a director or a company to which section 2(18) does not apply), and
(b) that the shares of the company carrying not less than 50% of the voting power were beneficially held throughout the relevant previous year by the public.
There are, therefore, submits Mr. Pal, two conditions imposed by Sub-clause (i) of Clause (b) of Section 2(18) which are cumulative and both must be fulfilled. The shares, in the first instance, should be shown or proved to have been unconditionally allotted to or acquired by the public. It should further be shown or proved that the shares were held by the public beneficially throughout the relevant previous year. If any of these conditions is not fulfilled, the company cannot be said to be a company in which the public are substantially interested.
10. We are inclined to agree with the aforesaid contentions of counsel for the Department. In fact, more or less the same arguments have been advanced by Dr. I). Pal, on behalf of the applicant.
11. Counsel for the department has submitted to us that the Supreme Court cases which were cited did not deal with the cases of trusts. The Supreme Court had no occasion to lay down any principle as to whether the acquisition of shares by the trustees would satisfy one of the essential conditions or requirements of Section 2(18)(b)(i). Counsel for the department invites us to hold that if shares be held by trustees, they must also be the beneficial owners of the shares. In other words, in the cases of trusts, the legal and beneficial owners must be one and the same.
12. We do not agree with this view. The legal owner and the beneficial owner may not be the same. The assessee's counsel is right in submitting that if it can be proved that both the legal owner and the beneficial owner are free agents and cannot be controlled by any individual, block, grouper class of persons who run or manage the affairs of the company, that provisions of Section 2(18)(b)(i) would be applicable.
13. Mr. B. Pal has also stated before us that the control of an individual or a block can, in the absence of direct evidence, be inferred from the surrounding circumstances including the conduct of the parties. In the instant case, the Department's contention is that Gokulchand Bangur, in his individual capacity, was holding 600 shares of the company. This Gokulchand is the common trustee of ' M/s. Gobindlal Bangur ' and ' Gokul Chand Bangur Trustees of Bangur Charitable Trust' holding 800 shares and of ' M/s. Gokulchand Bangur and Narsingdas Bangur, Trustees of P. D. Bangur Trust' holding 800 shares. These facts are sufficient to establish that the trustees of these two trusts are not free agents and are under the control of Gokulchand Bangur.
14. In our judgment, the evidence, on which the Department relies, is insufficient to come to the positive conclusion that the two trusts aforesaid are under the control of an individual who runs or manages the affairs of the company. In fact, before the tax authorities no evidence* on this matter, it appears to us, has been led at all. We have said that to enjoy the protection of Section 2(18)(b)(i), it is necessary to prove not only that the shares have been unconditionally allotted to or acquired by the public, but also they are held beneficially by the public. In the absence of requisite evidence it is not possible for us to come to any conclusion one way or the other.
15.In these circumstances, we are unable to answer the question referred to us and remit the matter to the Tribunal to give an opportunity to the parties to adduce evidence in support of their respective cases. The Tribunal after taking such evidence as may be adduced, would give its decision according to law.
16. I agree.