Business income from sale of securities is taxable where the disposal is integral to a bank's ordinary operations.

A High Court's duty to consider certification under Section 205 of the Government of India Act, 1935 arises only where a substantial constitutional question may reasonably be involved; where no such question can reasonably arise, the absence of a certificate does not bar Privy Council jurisdiction. On tax, profit from the sale of securities and shares by a banking company is assessable as business income under Section 10 of the Indian Income-tax Act, 1922 when the realisation is integral to the bank's ordinary business, such as holding and realising readily saleable securities to meet depositors' demands. The preliminary objection failed and the gain was held taxable.

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Issues: (i) Whether, in the absence of a certificate under Section 205 of the Government of India Act, 1935, the appeal could be entertained by the Privy Council; and (ii) whether the profit realised on sale of securities and shares by a banking company formed part of the profits and gains of its banking business chargeable to tax under Section 10 of the Indian Income-tax Act, 1922.

Issue (i): Whether, in the absence of a certificate under Section 205 of the Government of India Act, 1935, the appeal could be entertained by the Privy Council.

Analysis: The provision requiring the High Court to consider, of its own motion, whether a substantial question of law as to the interpretation of the Government of India Act, 1935, arose was held to be directory and applicable only where there was a reasonable possibility that such a question was involved. Where no such question could reasonably arise, the absence of a certificate did not oust the appellate jurisdiction, and the preliminary objection based on Section 205 failed.

Conclusion: The preliminary objection was rejected and the appeal was competent.

Issue (ii): Whether the profit realised on sale of securities and shares by a banking company formed part of the profits and gains of its banking business chargeable to tax under Section 10 of the Indian Income-tax Act, 1922.

Analysis: Profit on sale of securities is taxable where the realisation is not a mere change of investment but an act done in the course of carrying on the business. In the case of a bank, keeping and realising readily saleable securities to meet depositors' demands is part of the normal banking business. The realised gain was found to have arisen from transactions linked with the bank's ordinary business operations and not from a mere investment realisation outside the business.

Conclusion: The profit was held to be taxable as business income.

Final Conclusion: The appeal failed on both the jurisdictional objection and the merits, and the taxability of the gain was affirmed.

Ratio Decidendi: A gain on realisation of securities is assessable as business income where the sale is an integral part of carrying on the taxpayer's business, and a High Court's duty to consider certification under Section 205 arises only when a substantial constitutional question may reasonably be involved.

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