Ramaswami, J. - (1.) The question for consideration in these appeals is whether the respondent, a Hindu undivided family, is entitled to exemption from taxation in respect of the interest income from Government securities held by it, under a notification of the Government of India dated March 21, 1922, issued under section 60 of the Income Tax Act, 1922.
(2.) The late Raja of Bhor held certain Government securities and up to the assessment year 1953-54, he was assessed in the status of individual in respect of his income. He died on October 9, 1954. His estate including the Government securities thereupon passed to his three sons who constituted a Hindu undivided family. The eldest of them succeeded to the title of Raja of Bhor. For the assessment years 1954-55 to 1958-59 the present Raja of Bhor filed returns as a Hindu undivided family consisting of himself and of his two brothers. He claimed exemption in respect of the interest income with regard to the Government securities on the ground that it was exempt under the notification issued under section 60 of the Income Tax Act, 1922. Section 60 empowers the Central Government, by notification in the Official Gazette, to make exemption, reduction in the rate or other modifications in respect of the income-tax in favour of any class of persons. In exercise of its powers under section 60, the Central Government issued a notification on March 21, 1922, which was to the following effect : "The following classes of income shall be exempt from the tax payable under the said Act and they shall not be taken into account in determining the total income or salary of an assessee for the purposes of the said Act except for the purposes of sub-section (4) of section 48 :..... (8) the interest on Government securities held by, or on behalf of, Ruling Chiefs and Princes of India as their private property."
(3.) The Income-tax Officer rejected the claim of the assessee on the ground that the securities were the "properties of the Hindu undivided family of whom the present ruler and his brothers are members and they cannot lay claim to these securities as their private properties as they belong to the Hindu undivided family". The assessee preferred an appeal to the Appellate Assistant Commissioner who took the view that the Hindu undivided family was holding securities on behalf of the Ruling Chief or Princes of Indian States, and as such the exemption contained in the notification was application. In this view of the matter he allowed the appeal of the assessee. The income-tax department took the matter in appeal to the Appellate. Tribunal which affirmed the decision of the Appellate Assistant Commissioner and dismissed the appeal. At the instance of the income-tax department the Appellate Tribunal stated a case to the High Court on the following question of law : "Whether, on the facts and circumstances of the case, the interest on securities assessable under section 8 of the Income Tax Act was exempt from tax in the assessees hands in view of the Notification No. 878F dated March 21, 1922, issued under section 60 of the Income Tax Act - ;