Banking income from securities treated as business income, allowing set-off of brought forward business loss against interest receipts.

Interest on securities held as part of a bank's trading assets was treated as income from banking activity because the securities formed part of working capital kept in lieu of cash to preserve liquidity for customer disbursements. On that factual basis, the income from securities could not be separated from the banking business for set-off purposes, and the brought forward business loss was allowed against the entire income, including such interest.

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Issues: Whether, on the facts and in the circumstances of the case, the assessee was entitled to set off the brought forward business loss against the entire income including interest on securities held by it.

Analysis: The decisive question was whether the securities from which interest was earned formed part of the trading assets of the bank and whether dealing with those securities was as much part of the banking business as receiving deposits and making withdrawals. On the fuller statement of facts, the securities were found to have been held as part of the bank's working capital in lieu of cash, maintaining liquidity for disbursements to constituents, and the interest derived from them was therefore part of the banking activity. In that setting, the income from securities could not be separated from the banking business for the purpose of the reference.

Conclusion: The issue was answered in favour of the assessee; the business loss could be set off against the income including interest on securities.

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