LEACH, C.J. - The assessee is a Co-operative Central Bank registered under the India 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 not 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 rate 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.
The assessee is satisfied with the reference of these two questions and therefore the Court is not called upon to go beyond them.
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 with 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'.
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 Commissioner of Income-tax, Bombay v. Ahmedabad Millowners Association. 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 if one merely took the dictionary meaning of the word 'individual' it would include a limited liability company, but he considered that to do so would not be in accordance with its popular use by people speaking the English language. He concluded his judgment with this statement :
'The question is whether other association of individuals includes an association of companies. It seems to me quite clear on the context that it cannot do so. Individual where first used, must mean human being, because it is used as something distinct from a joint family, firm and company. The whole expression seems to me to mean every human being, Hindu undivided family, company, firm and other association of human beings. One cannot give to the word individuals in the expression association of individuals a different meaning to that which the word individuals bears where it appears in the same phrase.'
This opinion is in direct conflict with the opinion expressed by the learned Chief Justice in an earlier case : Currimbhoy Ebrahim Baronetcy Trust v. Commissioner of Income-tax, Bombay. One of the questions in that case was whether a Corporation styled 'The Trustees of the Sir Currimbhoy Ebrahim Baronetcy Trust' which had been created under an Act passed by the Governor-General in Council was to be deemed to be an individual within the meaning of section 3 of the Income-tax Act. The Income-tax Authorities had assessed the Corporation as an association of individuals. Beaumont, C.J. held that the Corporation was an 'individual' with in meaning of the section and not an association of individuals. The question of the legality of the assessment was taken to the Privy Council and though the question of the status of the Corporation was not directly raised before the Board it falls to be observed that the decision of the Bombay High Court was affirmed.
I consider that the opinion expressed in Currimbhoy Ebrahim Baronetcy Trust v. Commissioner of Income-tax, Bombay is preferable to that expressed in Commissioner of Income-tax, Bombay v. Ahmedabad Millowners Association. While it is true that ordinarily in conversation the use of the word individual would be taken to denote a person, the word has in fact as far wider meaning. The first definition of the word given in the Oxford Dictionary is : 'one in substance or essence; forming an indivisible entity; indivisible'. It is also defined as 'existing as a separate indivisible entity, numerically one, single'. If a corporate body created by a statute is an individual within the meaning of the section I hold that it is - a co-operative society registered under the Co-operative Societies Act must fall within the same category. It is a corporate body and has perpetual succession. I consider that it is not reasonable to suppose that the Legislature intended that there should be a difference in the meaning of the word individual and the plural individuals. If the word individual includes a corporation, the words association of individuals must embrace an association of corporate bodies, and therefore the assessee is an association of individuals.
Support for the opinion that the assessee comes within Section 3 is to be found in the decision of the Allahabad High Court in Ram Ratan Das Madan Gopal v. Commissioner of Income-tax Central and United Provinces and of the Lahore High Court in Mian Channu Factories Union v. Commissioner of Income-tax. In the former case a Bench of the Allahabad High Court held that the word individual in the proviso to section 55 of the Income-tax Act includes an undivided Hindu family. In the Lahore case, which was also decided by a Bench a 'ginning factories union' which was composed of two firms and a Hindu undivided family was assessed to income-tax on the basis that is was an association of individuals. To give the word individual the meaning of person only would, it seems to me, be no disregard the scheme of the Act and to rob the word of an accepted meaning. If follows that in my opinion the first question referred should be answered in the affirmative.
The second question requires little discussion. The Income-tax authorities have held that the assessee is carrying on an ordinary banking business. It carries on a banking business with non-members and therefore cannot maintain the claim to be a mutual benefit society. It can only escape taxation under the provisions of the Notification which the Central Government has published under section 60 of the Act, which means that it must pay tax at the rate applicable to the amount of its total profits, namely, Rs. 37,445. The principle stated in Trichinopoly Tennoor Fund v. Commissioner of Income-tax and repeated in Trichinopoly Tennoor Hindu Permanent Fund Ltd. v. Commissioner of Income-tax applies.
I would answer the second question in that sense.
As my learned brothers with me, the assessee must pay the costs which we fix at Rs. 250.
KING, J. - I agree.
KRISHNASWAMY AYYANGAR, J. - I agree.
Reference answered accordingly.