1937 (10) TMI 10

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....he instance of the company the question was referred by the Commissioner of Income-tax to this Court which decided that the income-tax authorities had taken the correct view. The Commissioner of Income-tax, Madras v. The Trichinopoly Tennore Hindu Permanent Fund, Ltd. (1927) 53 M.L.J. 881: 2 I.T.C. 386 (F.B.) After this decision had been given, the company took steps to alter its memorandum and articles of association. In the original memorandum the objects of the company were stated to be: (a) to enable persons to save money; (b) to enable persons to secure loans at favourable rates of interest on sufficient securities; and (c) to do all such other things as are incidental or conducive to the attainment of the ab....

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.... one month's notice, amounting to  25,000 and (g) 60C0 "Ordinary" shares of Re. 1 each fully paid up, amounting to  6,000                                                                    ________                                  &n....

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....mmissioner was directed to state a case on the following questions: (i) Whether the assessment of the petitioner to income-tax upon a sum of Rs. 24,995 for the year 1930-31 is valid and maintainable? (ii) Whether the present case is not governed by the decision in The Board of Revenue v. The Mylapore Hindu Permanent Fund, Ltd. (1923) I.L.R. 47 Mad. 1 (S.B.), and whether the petitioner is not therefore liable to pay income-tax? (iii) Whether the petitioner is not entitled to claim in computing the assessable income, a deduction of the amount paid to the shareholders and subscribers in excess of their contribution as being interest on borrowed capital within Section 10(2)(iii) of the Act? (iv) Whether the i....

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....les of association were altered. It appears to us that there is much substance in this contention. 7. A person who wants a loan can obtain one from this company, if he pays one rupee for a share, and he is entitled to have that one rupee paid back to him at the end of two years. Out of a gross income of Rs. 33,954-7-8 for the nine months ended 31st March, 1930, a sum of Rs. 14,217-13-9 represented interest on loans granted to persons who had each acquired an ordinary share of one rupee and only Rs. 139-11-4 was paid to these persons by way of dividend. The holders of permanent shares received in dividends Rs. 6,542-2-6, the holders of original term shares Rs. 5,550-9-5, the holders of "B" class term shares Rs. 3,660-5-9, and the holders ....

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....pression "interest of money" in Section 2 of that Act was not restricted to annual interest and that the interest received by the society was not in respect of a loan on land, but of a contract relating to the interest of money lent, and was, therefore, assessable in their hands to income-tax. In the case before us likewise borrowers become members, but the holders of ordinary shares are members in. name only. Their membership does not in any sense give them the benefits of membership of a mutual benefit society. Therefore, we consider that the answer to Question No. (i) should be in the affirmative and the answer to Question No. (ii) should be that it is not governed by the Mylapore Fund case. 10. The answer to Question No. (iii) has be....