Self-contained tax exemption for interest income must be read on its own terms, without importing separate deduction provisions.

A notification granting exemption from income-tax on interest receivable from specified securities was treated as a self-contained exemption provision. Its language was construed to cover the full contractual interest, subject only to the stated territorial conditions, and not the net amount after deducting expenditure incurred in collection. Section 8 deductions could not be imported to reduce the exemption unless the notification itself so provided. Although the exempt interest remained includible in total income for section 16 purposes, that did not limit the scope of the exemption. The entire interest amount was therefore exempt on the notification's own terms.

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Issues: Whether the assessee was entitled to income-tax rebate on the entire interest receivable from income-tax free securities issued by the former Governments of Travancore and Cochin, and whether the notification issued under section 60A governed the exemption on its own terms.

Analysis: The notification granted a total exemption from income-tax on the interest receivable on the specified loans, subject only to the stated conditions that the interest be received within Travancore-Cochin and not brought into other taxable territories. It did not refer to section 8 of the Income-tax Act, and was treated as a self-contained exemption provision. On its plain language, the expression "interest receivable" meant the full contractual interest on the securities and not the balance after deducting expenditure incurred in realising it. The exempt interest was nevertheless includible in total income for section 16 purposes, but that did not cut down the exemption.

Conclusion: The assessee was not entitled to restrict the exemption by applying section 8 deductions, and the entire interest amount was exempt from income-tax. The appeal failed.

Ratio Decidendi: Where a notification grants a clear and unconditional exemption in respect of a specified class of income, it must be construed on its own terms and cannot be curtailed by importing deductions from a separate computation provision unless the notification itself so provides.

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