HOSHIARPUR CENTRAL CO OPERATIVE BANK LIMITED HOSHIARPUR Vs. COMMISSIONER OF INCOME TAX SIMLA
LAWS(SC)-1960-8-13
SUPREME COURT OF INDIA (FROM: PUNJAB & HARYANA)
Decided on August 02,1960

HOSHIARPUR CENTRAL CO OPERATIVE BANK,LIMITEDHOSHIARPUR Appellant
VERSUS
COMMISSIONER OF INCOME TAX,SIMLA Respondents


Referred Judgements :-

MAD PROVINCIAL COOPERATIVE BANK LTD. V. COMMR. OF INCOME TAX [REFERRED]
COMMR. OF INCOME TAX,BURMA V. BENGALEE URBAN COOPERATIVE CREDIT SOCIETY; LTD. [REFERRED]
COMMISSIONER OF INCOME-TAX VS. MADRAS CENTRAL URBAN BANK (LTD) [REFERRED]


JUDGEMENT

Hidayatullah, J. - (1.)This is an appeal against the judgment and order of the High Court of Punjab with the certificate of the court granted under S. 66A (2) of the Indian Income-tax Act.
(2.)The Hoshiarpur Central Co-operative Bank, Ltd., Hoshiarpur, hereinafter referred to as the Bank, is the appellant, and the Commissioner of Income-tax, Simla is the respondent. For the assessment years 1948-49 and 1949-50, the Income-tax Officer included in the assessment of the Bank certain income which had accrued to the Bank as profits from trading in controlled commodities like sugar, cloth, kerosene, etc., which the Bank was allowed to deal in, with the approval of the Registrar of Co-operative Societies conveyed in a letter dated September 28, 1954. The Bank claimed exemption under a notification issued under S. 60 of the Income-tax Act, but the contention was not accepted. On appeal, the Appellate Assistant Commissioner reversed the decision, which , on further appeal, was reversed by the Appellate Tribunal, Delhi Branch. The Appellate Tribunal, however, raised, and referred the following question to the High Court under S. 66(1) of the Income-tax Act: Where a co-operative bank deals in sugar and standard cloth with special permission of the authorities and earns income from such activities, is such income exempt from tax under Item 2 of the Government of India Notification F. D. (C. R.) Notification R. Dis. No. 291-I. T./25 dated 25th August, 1925, as subsequently amended (Income-tax Manual, 10th Edition, Part II, pages 257-258) - The High Court answered the question against the Bank, but certified the case as fit for appeal to this Court, and hence this appeal.
(3.)It is admitted on all hands that the profits were made from trading in certain commodities with the approval of the Registrar of Co-operative Societies. The quantum and the manner in which those profits were made, are not in dispute. The short question in this appeal is whether the exemption granted by the notification covers the case. The notification reads as follows:
"Income included in total income but exempt from both income-tax and super-tax:
The following classes of income shall be exempted from the tax payable under the said Act, but shall be taken into account in determining the total income of an assessee for the purposes of the said Act:-
(1) **********

(2) The profits of any Co-operative Society other than the Sanikatta Saltowners' Society in the Bombay Presidency for the time being registered under the Co-operative Societies Act, 1912 (II of 1912), the Bombay Co-operative Societies Act, 1925 (Bombay Act VII of 1925), the Burma Co-operative Societies Act, 1927 (Burma Act VI of 1927) or the Madras Co-operative Societies Act, 1932 (Madras Act VI of 1932), or the dividends or other payments received by the members of any such society out of such profits.

Explanation:For this purpose the profits of a Co-operative Society shall not be deemed to include any income, profits or gains from:-

(i) Investment in (a) securities of the nature referred to in S. 8 of the Indian Income-tax Act, or (b) property of the nature referred to in S. 9 of that Act;

(ii) dividends, or

(iii) the 'other sources' referred to in S. 12 of the Indian Income-tax Act".

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