Exemption for co-operative society profits: notional single insurance profit treated as the society's income class and is exempted.

A co-operative society conducting life insurance that computes its profit as a single notional amount under the Schedule is covered by a notification exempting "the profits of any co-operative society," because that notification applies to classes of income and the explanatory exclusion operates only where the society in fact derives income assessable under separate heads. The Schedule's single notional insurance profit therefore constitutes the society's profit class and falls within the exemption, resulting in exemption of the whole assessed profit under the notification.

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Issues: Whether a co-operative mutual insurance society whose income is computed as a single notional amount under the Schedule to the Income-tax Act is exempt from income-tax under the notification issued under Section 60 of the Income-tax Act.

Analysis: The resolution requires construction of Section 60 and the Central Government notification thereunder read with the special scheme for computing insurance business income under Section 10(7) and the Schedule (rule 2). Section 10(7) substitutes the Schedule's method of computing life insurance profits as a single notional unit of income, so that such an insurer does not present multiple heads of income under Section 6. The notification under Section 60 exempts "the profits of any co-operative society" as a class of income, with an explanation excluding incomes of the kinds listed (those assessable under the heads set out in Section 6). That explanatory exclusion applies only where the society in fact has income falling within those heads. A co-operative society that is also an insurance company has its profits represented solely by the single notional income produced by the Schedule, and therefore does not have income falling within the heads enumerated in the explanation. The notification's phrase "classes of income" is broader than "heads of income" and may include the singular class of income represented by a co-operative insurer's notional insurance profit; accordingly sub-clause (2) applies to such societies while the explanation does not.

Conclusion: The notification under Section 60 exempts the whole of the assessee's profits; the reference is answered in the affirmative in favour of the assessee.

Ratio Decidendi: Where a co-operative society carrying on life insurance computes a single notional profit under the Schedule pursuant to Section 10(7), a notification under Section 60 exempting "the profits of any co-operative society" applies to that notional insurance profit and the explanatory exclusion operates only if the society actually derives income assessable under the separate heads in Section 6.

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