Co-operative bank stock-in-trade securities interest remains exempt where the investment exclusion applies only to capital investments.

Section 60 and the related exemption notification were interpreted broadly to cover a wider class of income, not merely income computed under a particular head. The Explanation was read as carving out only the specific excluded categories, and the reference to "investments" was confined to capital investments. Government securities held by a co-operative bank as stock-in-trade were therefore not treated as investment income within the exclusion. On that construction, the interest earned on those securities remained exempt, and the co-operative society's claim to exemption succeeded.

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Issues: Whether interest on Government securities held by a co-operative bank as stock-in-trade was exempt from tax under the notification issued under section 60 of the Indian Income-tax Act, 1922, or stood excluded by the Explanation to that notification.

Analysis: The expression "class of income" in section 60 and in the notification was held to denote a broader category of income and not merely the heads of income for computation under the Act. Clause (2) of the notification exempted the profits of a co-operative society, and the Explanation was construed as carving out only the specific categories mentioned therein. On a proper reading, the Explanation did not confine the exemption to profits computable under section 10 alone. As to item (1) of the Explanation, the word "investments" was held to refer to securities held as capital investments and not to securities forming part of the society's stock-in-trade. Since the assessee held the Government securities as trading assets in the course of its banking business, the interest earned thereon was not income from investments within the meaning of the exclusion.

Conclusion: The interest on Government securities held as stock-in-trade was exempt and was not excluded by the Explanation to the notification.

Final Conclusion: The question referred was answered in the affirmative, and the assessee's claim to exemption succeeded.

Ratio Decidendi: For a co-operative society, a notification exempting the profits of the society is not confined to income computable under a particular head, and the exclusion of income from "investments" applies only to capital investments, not to securities held as stock-in-trade.

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