The money was a payment to the members by Lloyds Bank when it took over C&G. But the Inland Revenue decided last spring the bonuses were chargeable to capital gains tax, bringing an unexpected bill to thousands of people who now stand to receive tax rebates.
Neil Denniss, senior tax manager in the Cheltenham office of the accountants Clark Whitehill, organised a challenge to the Inland Revenue by 150 C&G investors.
He raised a fighting fund of pounds 16,000 and launched an appeal to the Special Commissioner of Income Tax. The case was heard in the names of two women account-holders.
The commissioners backed two separate arguments made by Mr Denniss. They said that bonuses paid on deposit accounts should be totally free of tax, contrary to the original Inland Revenue ruling.
They also said that bonuses paid on the separate category of share accounts should be allowed indexation relief, which Mr Denniss said would substantially reduce or even eliminate the capital gains tax payable.
C&G's 800,000 savers received cash bonuses worth an average of pounds 2,200 each in 1995 when the society was bought by Lloyds. Mr Denniss estimated that tens of thousands of people could be eligible for a capital gains tax rebate or would not have to pay at all.
It is believed that at least 40,000 members received bonuses of more than pounds 6,000, the level of the annual exemption below which capital gains tax is not charged.
Mr Denniss said that because there were a large number of cases of multiple accounts held by one person, many people received pounds 10,000 to pounds 13,000 and he knew of one person with a pounds 40,000 bonus. He said: "This should set a precedent for others in a similar position."
The Inland Revenue has the right to appeal within 56 days. A spokesman said it was considering the commissioners' decision. No decision has been taken on whether there will be an appeal.