Chagla, C.J.

1. The assessee in this reference is the Bombay Mutual Life assurance Co. Ltd. It is an incorporated company limited by guarantee and all the policy-holders are member of this company. Some policy-holders participate in the profits and some do not, and the very important question that arises on this reference is, whether the profits made by the participating members is income liable to tax at all. Shri Jamshedji contends that the participating policy-holders make contributions in order to meet certain contingent liabilities. It turns out that the liabilities are less than what they contemplate and although the word "profits" is used, in substance and in reality what the participating members receive is not profits but the return of their own contributions which were more than sufficient to meet the liabilities contemplated. I think Sir Jamshedjis definition of the profits received by the participating members is perfectly correct. But the question that we have to determine is whether under the Income-tax Act such surplus which is returned to the participating member is made liable to tax. If which was taxed was profits or income in the ordinary sense, then undo