Sudhindra Mohan Guha, J. - (1.) In this reference under Section 256(1) of the I.T. Act, 1961, at the instance of the Commissioner of Income-tax, West Bengal-III, Calcutta, the question referred to us is as follows : "Whether, on the facts and in the circumstances of the case, and on a correct interpretation of Section 41(1) and Section 86(v) of the Income-tax Act, 1961, the Tribunal is justified in holding that the sum of Rs. 56,916 received from M/s, Calcutta Hydraulic Press Association was not a profit chargeable to tax ?"
(2.) The assessment year involved is 1964-65. The business of the assessee is of pressing of jute bales and the assessee is a member the Calcutta Hydraulic Press Association. A number of other concerns engaged in pressing of jute into bales are also members of that association. Each of the members contributed to the fund of the association at 9 paise per bale pressed. The subscription paid by the assessee had been allowed as deduction in the computation of the income of the earlier years. The association maintained a fund styled as the "operating fund", the source of which was the subscription received from its members. The association also had income from dividend and interest. The association refunded Rs. 5 lakhs out of its accumulated "operating fund" to its members in the year under consideration and the assessee received Rs. 56,916 as its share. The ITO treated the same as income of the assessee as the subscription paid by the assessee had been allowed as a deduction.
(3.) After the matter came up in appeal before the AAC, he observed that the receipt was only a portion out of the subscription paid by the assessee, and that it was assessable under Section 41(1) of the I.T. Act, 1961.;