ARIJIT PASAYAT, C. J ( 1 ) PURSUANT to the directions given by this Court under Section 256 (2) of theincome-tax Act, 1961 (in short, the Act) in ITCs 31/73 and 19/74, the followingquestions have been referred for opinion of this Court by the Income-tax Appellatetribunal, Delhi Bench-E (in short, the Tribunal): "1. Whether on the facts and in the circumstances of the case, the Tribunalwas correct in upholding the order of the Appellate Assistant Commissionercanceling the order of the Income-tax officer passed under Section 104 of theincome-tax Act?"2. Whether on the facts and in the circumstances of the. case, the Tribunalwas correct in holding that all the persons counted as one by the Income-taxofficer are not relatives of one another in terms of Section 2 (41) and,therefore such persons cannot be grouped as one person under sub-clause (ii) of Explanation I of Section 2 (18) of the Income-tax Act, 1961 ?3. Whether on the facts and in the circumstances of the case the Tribunalwas legally correct in holding that the sons and grand children of Shri V. P. Gupta were not relatives of Shri D. R. Gupta within the terms of Section 2 (41)and assuch could not be grouped as one person under clause (ii) ofexplanation I to Section 2 (18) of the IT Act, 1961 "2. Factual position as set out in the statement of case is as follows: ( 2 ) QUESTION arose during the assessment year 1962-63 and 1965-66 as to whetherthe assessee, M/s Motor and General Finance Ltd. was a company in which thepublic were substantially interested during previous years relevant for the assessmentyears ending on 3. 6. 1961 and 30. 6. 1964 respectively. For adjudication of thisquestion in terms of sub-clause (ii) of Explanation 1 to Section 2 (18) of the Income-tax Act, 1961 read with Section 2 (41) of the Act was considered necessary. Saidquestion arose in the context of Section 104 of the Act. Under Section 108 of the Act,the provisions of Section 104 do not apply to any company in which public aresubstantially interested. In which case public are substantially interested is dealt within Section 2 (18 ). Assessing officer was of the view that the provisions of Section 104were applicable to the case. Under Section 108 of the Act,the provisions of Section 104 do not apply to any company in which public aresubstantially interested. In which case public are substantially interested is dealt within Section 2 (18 ). Assessing officer was of the view that the provisions of Section 104were applicable to the case. He found that the total equity shares were 2,40,000 and1,34,151 shares were held by the following persons:i. Daulat Ram Public Trust 45000ii Daulat Ram Public Trust Education Society 10000iii. The 20 members of the Gupta family and two Trusts (SI No. 1-22) 65080iv. Shareholdings belonging to the group of SN Gupta 8611v. Shareholders of Syal Group 5460 ( 3 ) HE was of the opinion that 50% of the voting power was in the hands of fivepersons and therefore the assessee was a company in which public was notsubstantially interested. Additional super-tax was levied for both the years. It is to benoted that orders under Section 104 of the Act for the assessment years in questionwere passed on 22-3-1968 and 30-3-1970 respectively. ( 4 ) ASSESSEE preferred appeals before the Appellate Assistant Commissioner (inshort, AAC) submitting that shareholding of 65080, which the Assessing Officer hasheld to be belonging to one group, was not really so. AAC accepted this contentionwith reference to Section 2 (41) and held that a person and his relatives could beclubbed together only to the extent they were relatives of one and another. As a result,d. R. Gupta and V. P. Gupta who Were brothers were relatives of each other. But V. P. Gupta could not be said to be relative of the sons or grand children of D. R. Gupta andvice versa. AAC held that from group No. 3 the holdings of V. P. Gupta and his sonsaggregating to 28512 should be excluded. If this was done the remaining holdings ofthe five biggest groups do not equal to 50% of the voting power. Revenue carried thematter in appeal before the Tribunal for assessment year 1962-63 where findingswere recorded by the AAC. Two contentions were raised before the Tribunal by therevenue. First was that even if AAC was right in his interpretation of "relative" theassessee company would still be within the pale of Section 104 and thereforeanalysis made was erroneous. Said contention was rejected by the Tribunal. It wasobserved that the classifications made by the Revenue were not correct. For, whiled. Two contentions were raised before the Tribunal by therevenue. First was that even if AAC was right in his interpretation of "relative" theassessee company would still be within the pale of Section 104 and thereforeanalysis made was erroneous. Said contention was rejected by the Tribunal. It wasobserved that the classifications made by the Revenue were not correct. For, whiled. R. Gupta, his wife and sons were relatives of one another, the introduction of V. P. Gupta into the group will take them out because the wife and children of D. R. Guptawere not relatives ofv. P. Gupta within the meaning of Section 2 (41 ). Similarly V. P. Gupta and his grand children were notencompassed. The result was achievedbecause under the statute each of the sons of DR. Gupta was a relative vis-a-vis onlyhis parents, children and brothers but, not vis-a-vis his nephews and nieces. Alternatively the Revenue s contention that interpretation given to the expression"relative" was not correct did not find favour with the Tribunal. Stand of the Revenuewas that all family members of V. P. Gupta and D. R. Gupta should be construed asfamily. As D. R. Gupta, his wife and grand children were relatives, likewise V. P. Guptaarid his sons were relatives; again D. R. Gupta group were relatives. In regard to theobject and purposes of the definition which was to treat the relatives of a certainindividual as one with him all the persons mentioned in group 3 of the analysis madeby the Income tax Officer should be treated as one for the purposes of the Section. This stand as noted above was not accepted. Subsequently, same view was takenby the AAC and Tribunal for assessment year 1965-66. Applications for referenceunder Section 256 (1) were rejected and as stated, on being moved under Section256 (2) of the Act, references have been made. Stand taken before the Tribunal wasreiterated before us. There is no appearance on behalf of the assessee when thematter was called. ( 5 ) IN order to appreciate the stand of the Revenue, it is necessary to quote Section2 (18) and 2 (41), as it stood between 1. 4. 62 and 1. 4. 65, which read as follows: "2 (18) A company is said to be a company in which the public are substantiallyinterested. (a) xxxxxxxxxxxxxxxxx (b) If it is not a private company as defined in the Companies Act, 1956 (1 of1956 ). 4. 62 and 1. 4. 65, which read as follows: "2 (18) A company is said to be a company in which the public are substantiallyinterested. (a) xxxxxxxxxxxxxxxxx (b) If it is not a private company as defined in the Companies Act, 1956 (1 of1956 ). xxxxxxxxxxthe affairs of the company, of the shares carrying more then fifty per cent ofits total voting power were at no time during the relevant previous yearscontrolled or held by less than five persons;xxxxxxxxx (ii) persons who are relatives of one another and persons who are thenominees of any other person, shall be treated as a single person;xxxxxxxxx (41) "relative" in relation to an individual, means the husband, wife, brother orsister or any lineal descendant or descendant of that individual. ( 6 ) CLAUSE (2) of Explanation 1 of Section 2 (18) is categorical and definite thatunless two or more persons are relatives of one and another, they cannot be treatedas single person. The expression "relative" as appearing in Section 2 (41) is inrelation to an individual and persons, who are included in the category of "relatives"have been spelt out in the provision itself, i. e. , husband, wife, brother or sisters or anylineal ascendant or ascendant of that individual. Expression "that individual" is thekey to the intention of the legislature. It has link with the expression "an individual"which appears in the earlier part of the provision. Therefore, while husband, wife,brother and sisters or lineal ascendant of an individual is concerned, merely becauseanother person who is relative being one of the indicated categories, relatives of thatperson are not covered by expression relative under section 2 (41), so far as theother individual is concerned, Tribunal has categorically found this aspect on analysisof the factual position. Answer to the questions referred to are, therefore, in theaffirmative in favour of the assessee and against the Revenue.