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Issues:
1. Whether the sum derived from transactions with shareholders is liable to assessment under income tax laws. Analysis: The case involved the Tanjore Permanent Fund Limited, a company incorporated under the Indian Companies Act, which accepted deposits and lent money to its shareholders. The main source of income for the Fund was the interest on loans advanced to shareholders, along with other sources like interest on deposits, securities, and house rent. The Fund's profits, after deducting expenses and interest earned by shareholders, were distributed among shareholders and reserved. The Commissioner questioned whether the profits of Rs. 61,304 derived from shareholders were subject to income tax assessment for the year 1932-33. The Commissioner relied on a previous decision involving a similar fund, where it was held that such funds were mutual benefit societies, and receipts from shareholders were not taxable income. However, the Income Tax Officer assessed the Fund based on a different interpretation of a separate case, leading to a dispute. The High Court clarified that there was no conflict in its previous decisions. It emphasized that the Fund, despite being registered under the Companies Act, was essentially a mutual benefit society, not a typical company. The Court highlighted that the legislature recognized such societies, and the Fund fell within the scope of exempt entities as per previous rulings. The Court refused to reopen the question settled in the earlier case and upheld the Fund's non-liability for assessment. It reiterated that the Fund's structure and operations aligned with the principles established in the precedent case, confirming that the profits derived from shareholders were not subject to income tax. The Court awarded costs to the assessee and ordered a refund of the deposit made for the case. In conclusion, the Court held that the sum of Rs. 61,304 derived from transactions with shareholders was not liable to assessment under income tax laws based on the Fund's status as a mutual benefit society, as established in previous judgments.
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