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1. Only one question has been referred to us for determination in this reference under section 256(1) of the Income-tax Act, 1961. That question runs as follows :

"Whether, on the facts and in the circumstances of the case, Indo-Nippon Chemical Co. Ltd. was a company in which the public were substantially interested within the meaning of section 2(18) of the Income-tax Act, 1961, in the years under reference ?"

2. Although the statement of the case is somewhat long, the relevant facts are very few. The assessee company was incorporated in 1960 for manufacturing plasticizers in collaboration with Nichimen & Co. of Osaka, Japan, which we propose to refer to hereafter as "the Japanese company". By April 1, 1964, the assessee company had issued 27,000 shares at cost price. Eight thousand three hundred and forty-four of these shares were held by a private limited company and 9,900 of these shares were held by the Japanese company. The remaining shareholdings were relatively small. There were 18 shareholders in all. Article 53 of the articles of association of the assessee conferred absolute and uncontrolled discretion on the board of directors to decline to register a transfer of shares but provided that in case of such refusal, the board of directors must give intimation of refusal within two months to the transferee and the transferor. In respect of the previous year relevant to the assessment year 1964-65, a question arose whether the assessee was a company in which the public were substantially interested. The assessee urged that it was such a company and the Revenue asserted that it was not. It was found, inter alia, by the Tribunal that the Japanese company was a company in which the public were substantially interested as per the certificate of the auditors of the company. That certificate had not been called in question until the hearing of the appeal by the Tribunal and the Tribunal did not permit the Revenue to question the correctness of that certificate before it. On these facts, the Tribunal came to the conclusion that the Japanese company was a company in which the public were substantially interested within the meaning of section 2(18) of the Income-tax Act, 1961. It is from this decision of the Tribunal that the aforesaid question has been refer all proceedings. However, it is obvious from the facts stated he assessee has not co-operated in the payment of taxes." all the conditions for waiver of penalty and interest are terest are est are nd hence he rejected the petition. hence he rejected the petition. t, 1961, deals with power to reduce 1961, deals with power to reduce r this section, the Commissioner duce or waive, iause (b) of section 108 (hereinafter in this clause referred to as the subsidiary company), or