SHAH, .J. : - (1.) THE following Judgment of the court was delivered by:
(2.) THIS is an appeal with special leave granted by the High court of Madras The appellant is a Society registered under the Co-operative Societies Act, 1912. The following table sets out the data relating to the earnings, investments, working capital, outgoings and expenditure of the Society for the year ending 30/06/1955, relevant to the assessment year 1956-57:- JUDGEMENT_55_AIR(SC)_1968Html1.htm In a proceeding for assessment of the total income of the Society to tax for the year 1956-57 it was claimed that under S. 14 (3) of the Indian Income-tax Act, 1922 (as added by S. 10 of the Finance Act, 1955, with effect from 1/04/1955) the income of the Society from business was exempt from payment of tax, and that in accordance with the instructions issued under S. 60 of the Act, out of the gross income from securities amounting to Rs. 4,30,053.00 , Rs. 4,16,475.00 being income attributable to the assets utilized in the business, only the balance of Rs. 13,578.00 was chargeable to tax. In support of its claim the 'Society 'relied upon the instructions published in the Income-tax Manual, 1946. In the view of the Income-tax Officer the Society could not claim the benefit of the Departmental Instructions, since in the relevant year of assessment those instructions had ceased to operate, and the Society's claim was governed by the Explanation to s. 8 of the Income-tax Act as incorporated by the Finance Act of 1956, with effect from 1/04/1956. He accordingly computed the taxable income under the head--'interest on securities' in the sum of Rs. 59,498.00 . The Appellate Assistant Commissioner modified the order of the Income-tax Officer and reduced the taxable income under the head 'interest on securities' to Rs. 13,578.00 applying the Departmental Instructions. He held that the Explanation to s. 8 of the Act applied to Banking Companies and not to Co-operative Societies.
(3.) IN appeal by the Commissioner of INcome-tax the Appellate tribunal reversed the order of the Appellate Assistant Commissioner, and restored the order of the INcome-tax Officer. IN the view of the tribunal, the Explanation to s. 8 of the Act cannot be invoked as the Society was not a Banking, Company, but the principle of the Explanation may well be called in aid and that the relief granted by the INcome-tax Officer was the only relief to which the Society was entitled. The following question of law was submitted by the tribunal to the High court of Madras: 'Whether the tribunal is justified in law in holding that the taxable income of the assessee from interest on securities is Rs. 59,498.00 ?' The High court reframed the question to read: 'Whether the taxable income of the assessee from interest on securities is Rs. 13,578.00 as contended by the assessee and as worked out on the basis of the Departmental instructions contained at pages 248 and 249 in Part III of the year 1946?', and answered it in favour of the Commissioner.;