JUDGMENT

PATHAK, C. J. I. :— These appeals has special leave are directed against the judement of the High Court at Allahabad disposing of an Income-tax Reference in favour of the assessee and against the Revenue.

2. The assessee is a coperative society running a sugar mill. For the assessment year 1968-69 it claimed payment of interesting amounting to Rs. 1,81,716. This was interest paid to the accounts of its members, who had deposited certain amounts with the assessee in accordance with Bye-law No. 50 and it was debited by the assessee to its profit and loss account. In the initial years of the working of the Society, certain partly paid shares were allotted to its farmer members. With a view to inducing these members to make further contribution to the capital of the Society, bye-law No. 50 was incorporated in the Bye-laws of the Society. The bye-law as amended provides :

"50. There shall be established a Loss Equalisation & Capital Redemption Reserve Fund in the society. Every producer- share holder shall deposit every year a sum not less than 0.32 paise and not more than 0.48 paise per quintal of the sugarcane supplied by him to the society, as may be determined by the Board un