The relevant facts are these. In June 1952, Mr. and Mrs. Keighery were and had been for some time, interested in a company called Aquila Steel Pty. Ltd. which had a considerable amount of profits available for distribution. Its issued capital consisted of £35,000 divided into 35,000 shares of £1 each, of which Mr. Keighery held 12,500, Mrs. Keighery held 8,750, their son Patrick held 5,000, and a man named White held 8,750. The public were not substantially interested in the company, in the sense given to that expression by s. 105 (4) (a). It was not a subsidiary of a public company in the sense of s. 105 (4) (b). In this state of things it was a private company for the purposes of Div. 7, falling within the description contained in par. (a) of s. 105 (1). It may be said without discussing in detail the application of Div. 7 to Aquila Steel, that it would have to pay additional tax under that Division unless it should make a distribution of the relevant profits before 30th April 1953 or pay Div. 7 tax. It was with this in view, and on the recommendation of the accountants and solicitors who were advising Mr. and Mrs. Keighery and Aquila Steel on taxation matters, that steps were taken to form the appellant company and make it a non-private company. It was incorporated on 20th June 1952 with a memorandum and articles so framed as to allow for what was afterwards done. At the first meeting of the directors the business transacted included the passing of resolutions for the purchase from Mr. and Mrs. Keighery and their son Patrick of their shares in Aquila Steel, and for the convening of an extraordinary general meeting, to be held two days later, on 27th June 1952, to pass a special resolution for the issue of 100 redeemable preference shares. The general meeting was held. Mr. and Mrs. Keighery, who were then the only shareholders, agreed to the resolution being proposed and passed as a special resolution notwithstanding that less than twenty-one days' notice had been given, and it was passed accordingly. Afterwards, but on the same day, Mr. and Mrs. Keighery met as the board of directors. They had before them applications from twenty persons for one redeemable preference share each, and resolved to allot the shares applied for. Some of the applicants were friends or acquaintances of Mr. Keighery, and had made their applications for the sake of obliging him; some were employees of Aquila Steel; and some were members or employees of the firm of accountants which recommended the procedure. The appellant company did not pay the amounts for which it had purchased the shares in Aquila Steel. By the 30th June 1952 Aquila Steel had declared a dividend which entitled the appellant company to £29,804 2s. 11d., and this amount constituted the whole of the net profit shown by the appellant company in its return of income derived in the year ended on that date. Being subject to rebate under s. 46, the profit entailed no liability to income tax under any of the provisions of the Act other than those in Div. 7. It might have entailed some liability, notwithstanding the rebate, if Aquila Steel had deferred declaring its dividend until after 30th June 1952. Whether for that or another reason, it was considered more advantageous to the appellant company that Aquila Steel should make its distribution before than after 30th June 1952.