Judgment

SIKRI, J. :

The respondent, the Kumbakonam Mutual Benefit Fund Ltd., hereinafter referred to as the assessee, is a company incorporated under the Indian Companies Act, 1882, limited by shares. Since 1938, the nominal capital of the assessee is Rs. 33,00,000/- divided into shares of Re. 1/- each. It carries on banking business restricted to its shareholders, i.e. the shareholders are entitled to participate in the various recurring deposit schemes of the assessee or to obtain loans on security. The statement of the case describes the working of the assessee thus :

"Recurring deposits are obtained from members for fixed amounts to be contributed monthly by them for a fixed number of months as stipulated at the end of which a fixed amount is returned to them according to published tables. The amount so returned will cover the compound interest of the period. These recurring deposits constitute the main source of funds of the assessee for advancing loans. Such loans are restricted only to members who have, however, to offer substantial security therefor, by way of either the paid up value of their recurring deposits, if any, or immovable properties within the Tanjore District.

Out