JUDGMENT

Sen, J.-Lakshmi Vilas Bank, Karur, respondent herein in course of its usual business of banking, purchases and sells securities for and on behalf of its constituents in consideration of agreed commission/brokerage. During the accounting periods relevant for the assessment years 1964-65 and 1965-66, the Bank purchased certain securities, namely, Madras State Electricity Board Bonds and Madras State Loan Bonds on behalf of its constituents. The usual practice of the Bank in purchasing the securities on behalf of the constituents was to require a certain percentage of the face value of the securities to be paid by the constituents in advance and the same was called margin money in deposit . On receipt of the said margin money, the Bank purchased securities at their face value in its own name. Each one of the constituents gave a letter to the Bank undertaking to pay the balance amount on or about hte specified date and also undertaking that if they did not pay the balance amount within the stipulated time, the securities would belong to the Bank and the margin money deposited by them would stand forfeited to the Bank. This was in addition to the commission and service charg