M.C. Desai, C.J. - (1.)THIS is a case stated by the Income-tax Appellate Tribunal, Allahabad Bench, and the question referred is:
"Whether the net income of Rs. 1,81,569 and Rs. 1,97,198 received by the assessee in the assessment years 1958-59 and 1959-60 respectively on account of interest on securities is exempt from tax under Section 14(3) of the Income-tax Act ?"

(2.)THE assessee is a co-operative society carrying on the business of banking and registered under the U.P. Co-operative Societies Act, 1912. Its main business is providing finance to its own members and occasionally it provides banking facilities to non-members. It holds Government securities in the course of its banking business and earns interest from them. Its total income is more than Rs. 20,000. During the assessment years 1958-59 and 1959-60, it received Rs. 1,81,569 and Rs. 1,97,198 respectively as interest on the securities and claimed that it was exempted from the liability to pay income-tax on them by Section 14(3)(i) of the Income-tax Act. THE case of the Commissioner of Income-tax was that the income was chargeable under Section 8 of the Act and that, since its total income exceeds Rs. 20,000 and it was not a housing society or urban consumers' society or a society carrying on transport business, it was not entitled to the benefit of Clause (iv) of Section 14(3) and that Clause (i) is not applicable to income from interest on securities. THE Tribunal accepted the contentions of the Commissioner, held that the assessee was not entitled to the exemption from tax and then at its instance stated the case.
Income-tax is chargeable by Section 3 on the total income of every association of persons. Section 6 lays down that save as otherwise provided by the Act the following heads of income, profits and gains shall be chargeable to income-tax in the manner hereinafter appearing, namely:

(i) Salaries.

(ii) Interest on securities,

(iii) Income from property.

(iv) Profits and gains of business, profession or vocation,

(v) Income from other sources,

(vi) Capital gains.

Section 7 provides for the tax payable by an assessee under the head " Salaries ". Section 8 provides that " the tax shall be payable by an assessee under the head ' Interest on securities ' in respect of the interest receivable by him on any security ". Section 9 provides that " the tax shall be payable by an assessee under the head ' Income from property ' in respect of the bona fide annual value of property ", etc., subject to certain allowances. Section 10 provides that " the tax shall be payable by an assessee under the head ' Profits and gains of business, profession or vocation ' in respect of the profits or gains of any business, profession or vocation carried on by him" and the profits or gains are to be computed after making certain allowances mentioned in it. Section 12 provides that " the tax shall be payable by an assessee under the head ' Income from other sources' in respect of income, profits and gains of every kind which may be included in his total income (if not included under any of the preceding heads)". Section 12B provides for the tax payable by an assessee under the head " Capital gains ". Section 14 is as follows :

"1. ......

2. ......

3. The tax shall not be payable by a co-operative society, including a co-operative society carrying on the business of banking--

(i) in respect of profits and gains of business carried on by it; .... (iv) in respect of any interest on securities chargeable under Section 8 or any income from property chargeable under Section 9, where the total income of such society does not exceed twenty thousand rupees and the society is not a housing society or an urban consumers' society or a society carrying on transport business. "

(3.)INCOME, profits and gains have been divided into six heads enumerated in Section 6 for the purpose of assessing the taxable amounts of different kinds of income, profits and gains. INCOME from different sources is to be computed in different manner and, therefore, for the purpose of assessing the taxable amount income is divided into six heads. The heads are mutually exclusive and for the purpose of assessing the taxable amount an income must be placed under only one of the heads. Head (v) is a residuary head ; an income can come under it only if it does not come under heads (i) to (iv). There is no difficulty about heads (i) and (vi); the income from either of them cannot possibly be interest on securities or income from property or profits and gains of business, profession or vocation. As regards interest on securities and income from property, it is possible for either of them to be also profits and gains of business. If an assessee carries on business in securities, the securities held by him are his stock-in-trade and interest on them is profits and gains of the business. Similarly, if an assessee deals in certain property, the property is his stock-in-trade and income from it is a part of his profits and gains of business. In such cases the income is to be computed under head (ii) or head (iii) and not under head (iv) because heads (ii) and (iii) are more specific than head (iv). Head (iv) deals with profits and gains of business and profits and gains of business may include interest on securities and income from property but since heads (ii) and (iii) deal specifically with interest on securities and income from property the taxable income must be computed as laid down in Section 8 or 9 and not as laid down in Section 10. The income being specifically dealt with in Section 8 or 9 should not be dealt with under Section 10. It is a part of profits and gains of business but for the purpose of assessing its amount the manner laid down in Section 8 or 9 is to be adopted and not the manner laid down in Section 10.
The phrase " profits and gains of business " occurs not only in Sections 6 and 10, which are connected with each other, but also in Clause (i) of Section 14(3), Section 24 and Section 25. Section 24 allows a loss of profits and gains under any of the heads mentioned in Section 6 to be set off against the income, profits or gains under any other head of that year, subject to the proviso that a loss sustained in a speculative business is not to be set off except as against profits and gains of another speculative business, while Section 25 deals with assessment in case of discontinued business. The provisions in Sections 24 and 25, as also the provisions in Section 14(3)(i), do not deal with the manner in which income from profits and gains of business is to be computed and, therefore, the question under what head the income is chargeable is not relevant. When one has to consider any of these provisions, the only question that arises is whether the income is profits or gains of business or not. As I said earlier, income can be profits or gains of business even though its amount is to be assessed in the manner laid down for assessment of income from interest on securities or income from property. Though an income from interest on securities or from property may have to be computed in the manner laid down in sections 8 and 9 and not in the manner laid down in Section 10, it is profits and gains of business within the meaning of the provisions in Sections 24, 25 and 14(3)(i) if the securities are, or the property is, stock-in-trade of a business. There is no reference in Sections 24 and 25 to the head under which the income may be chargeable. There is no such reference in Section 14(3)(i) also and the absence of such a reference here is made all the more conspicuous by the reference to heads (ii) and (iii) in Clause (iv). Clause (iv) is in respect of "interest on securities chargeable under Section 8 " and "income from property chargeable under Section 9 " but Clause (i) is not in respect of " profits and gains of business chargeable under Section 10 ". There is no reason to think that the omission of the words " chargeable under Section 10 " from Clause (i)is accidental and the only reason that can exist for it is that Clause (i) is not confined to the profits and gains of business computed in the manner laid down in Section 10. Section 14(3) deals with exemption from taxation of certain income and not with the manner of computing particular income and is thus similar to the provisions contained in Sections 24 and 25, which also deal with non-taxability of certain income and not with the manner of its computation. Just as the question of the head under which the income is chargeable is irrelevant for the purposes of Sections 24 and 25, so also it is irrelevant for the purpose of Section 14(3).