SURAT PEOPLES CO OPERATIVE BANK LTD Vs. COMMISSIONER OF INCOME TAX AHMEDABAD

JUDGEMENT

(1.) THE assessee in this case is the Surat People's Co-operative Bank Ltd. , which is registered under the Bombay Co-operative Societies Act, 1925. Among the objects of the Bank is Object No. 5 "to undertake every kind of banking and shroffi business" and the assessee in the relevant year of account ending 30th June, 1949 was carrying on banking business. During the course of its banking business, the assessee purchased Government securities in the year of account and a profit of Rs. 53,229/- was earned by the assessee. The assessee claimed exemption from tax in respect of the said amount under an Explanation to F. D. (C. R.) Notification R. Dis. No. 291-1. T. /25, dated 25th August, 1925, as amended by Notification No. 26, dated 25th June, 1927. The Notification is in the following terms : "the following classes of income shall be exempt 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 Salt-owners Society in the Bombay Presidency for the time being registered under the Co-operative Societies Act, 1912 (2 of 1912) the Bombay Co-operative Societies Act, L925 (Bombay Act 7 of 1925), or the Madras Co-operative Societies Act, 1932 (Madras Act 6 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) investments in (a) securities of the nature referred to in Section 8 of the Indian Income-tax Act, or (b) property of the nature referred to in Section 9 of that Act, 2. dividends, or

(3.) THE 'other sources' referred to in Section 12 of the Indian Income-tax Act. " it was the contention of the assessee that under Sub-clause (2) of the Notification, the income of the assessee was exempt from tax and what was taken out from this provision by the explanation was merely "interest on securities'' and not profits made by the dealer in securities. The Tribunal rejected this contention, and it is against the decision of the Tribunal that the present reference has been made. The question referred to us is :