The main legal point established in the judgment is the interpretation of the term 'individual' and 'association of individuals' in the context of the Indian Income Tax Act, and the applicability of the notification of the Government of India under Section 60 of the Act.

Alfred Henry Lionel Leach, C.J.

1. The assessee is a co-operative central bank registered under the Indian Co-operative Societies Act of 1912. This statute has been replaced, so far as this Presidency is concerned, by the Madras Co-operative Societies Act (VI of 1932), but nothing turns on this. The assessee corporation consists of 671 shareholders. Of the shareholders 138 are persons and 533 co-operative societies. For the year of assessment 1937-38 the Income Tax authorities have held that the assessee had a total income of Rs. 37,445 made up as follows : - Rs. 5,293, interest on taxed securities; Rs. 1,519, interest on tax free securities; Rs. 4,009, interest obtained on deposits and Rs. 26,624, profits made on its transactions. The assessee does hot confine its business to its shareholders but carries on an ordinary banking business as well. By virtue of a notification of the Government of India under Section 60 of the Indian Income Tax Act of 1922 the "profits" of a co-operative society are exempt from Income Tax, but the notification stipulates that the profits shall be taken into account in determining the total income for the purposes of the Indian Income Tax Act. After excluding the Rs. 1,519, representing the interest on tax-free securities of the assessee and the Rs. 26,624 made on its business, the Income Tax authorities have assessed the assessee on an income of Rs. 9,302, but by taking into account the Rs. 26,624 they have held that the assessee must pay tax on the Rs. 9,302 at the fate which would be payable on an income of Rs. 37,445. The assessee challenged the correctness of this decision and asked the Commissioner of Income Tax to refer to this Court under the provisions of Section 66(2) of the Act certain questions. The Income Tax Commissioner considered that only two questions of law arose and these he has referred. They are as follows:

(a) Whether the Bank is an association of individuals within the meaning of Section 3 of the Act and whether it can be assessed to Income Tax as an association of individuals.

(b) Whether the Bank is not a Mutual Benefit Society and as such can be said to have derived a profit of Rs. 26,624 as a co-operative society to be included in its total income.

2. The assessee is satisfied with the reference of these two questions and therefore the Court is not called upon to go beyond them.

3. The first question arises out of a contention advanced on behalf of the assessee that the assessee was not liable to Income Tax at all as the assessee does not come within the charging Section 3. Section 3 says:

Where any Act of the Indian Legislature enacts that Income Tax shall be charged for any year at any rate or rates applicable to the total income of an assessee, tax at the rate or those rates shall be charged for that year in accordance with, and subject to the provisions of, this Act in respect of all income, profits and gains of the previous year of every individual, Hindu undivided family, company, firm and other association of individuals.

4. The argument is that the word individual must be taken to be used merely as denoting a person and therefore the words "and other association of individuals" cannot apply to a corporate body which for the most part is composed of co-operative societies. In support of this contention great reliance is placed on the judgment in The Commissioner of Income Tax Bombay v. Ahmedabad Millowners Association I.L.R. (1939) Bom. 451. In that case it was held that the expression "association of individuals" in Section 3 means an association of human beings. The question which the Court had to decide was whether the Ahmedabad Millowners Association which was composed of 61 members, 60 of whom were limited liability companies and one a person, was assessable to Income Tax. The case was decided by Beaumont, C.J. and Wadia, J. In the course of his judgment, the learned Chief. Justice stated that he was disposed to agree with the Commissioner of Income Tax that