Co-operative society exemption limited to business profits; securities and property income exempt only if proved to form part of business receipts.

A fiscal exemption for the profits of a co-operative society was construed as limited to business profits in their ordinary commercial sense, not to all receipts treated as income under the Income-tax Act. Interest on securities and property income were separately chargeable under distinct heads and were not automatically exempt, but could qualify if, on the facts, they formed part of the society's business profits. The society, as claimant to exemption, bore the burden of proving that the disputed receipts fell within the notified profits. The exemption therefore depended on the factual character of the receipts before it could be applied.

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Issues: Whether the exemption notification of 25 August 1925 covered the whole income of a co-operative society or only the profits of its business; and whether income from securities and property could qualify as exempt profits only if shown on the facts to form part of the business profits of the society.

Analysis: The notification exempted only the profits of co-operative societies. The expression "profits" was construed in its ordinary commercial sense as surplus arising from business, not as synonymous with "income" in the Income-tax Act. The Act separately charged interest on securities, property income, and business profits under different heads, showing that such receipts were not automatically business profits. Income from investments or property could, however, become business profits if, on the facts, the investments formed part of the business carried on by the society. Since the assessee claimed exemption, the burden lay on it to establish that the relevant receipts fell within the notified profits.

Conclusion: The notification did not exempt all income of the society as such. Income from securities and property was not prima facie exempt and could be treated as exempt only if the society proved that it formed part of the profits of its business.

Final Conclusion: The exemption was confined to business profits of the co-operative society, and the assessing authority was required to determine the character of the disputed receipts on the facts before applying the notification.

Ratio Decidendi: A fiscal exemption for the "profits" of a co-operative society does not extend to all receipts labelled as income under the Income-tax Act; only receipts shown to be business profits fall within the exemption, and the assessee bears the burden of proving that entitlement.

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