Co-operative society exemption covers interest on Government securities held as stock-in-trade, not just investment income.

The exemption notification for co-operative societies was construed to cover profits of the society generally and not to be confined to income computed under any particular head. Its exclusion for income from securities referred to in section 8 was read as applying to securities held as investments, not to Government securities held as stock-in-trade by a co-operative bank. Interest arising from such trading assets therefore remained within the exemption unless expressly excluded.

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Issues: Whether interest earned by a co-operative bank from Government securities held as stock-in-trade was exempt under the notification issued under section 60 of the Income-tax Act, 1922, or whether the exemption was confined to securities held as investments.

Analysis: The notification exempted the profits of a co-operative society and did not limit the exemption to profits computed under any particular head of income. Its Explanation excluded income from investments in securities of the kind referred to in section 8, but the wording showed that the exclusion was directed to securities held as investments and not to securities forming part of the society's stock-in-trade. Income from different sources may be computed under the relevant provisions of the Act, but once such income forms part of the profits of the co-operative society, it falls within the exemption unless expressly excluded. The earlier authorities supported the distinction between securities held as investments and securities held as trading assets of a banking society.

Conclusion: The exemption applied to interest earned on Government securities held as stock-in-trade, and the contention that such income was taxable was rejected.

Final Conclusion: The appeals failed because the assessee-co-operative bank was entitled to exemption on the disputed interest income.

Ratio Decidendi: Under the exemption notification for co-operative societies, securities held as stock-in-trade are not treated as investments, and income arising from such trading assets remains exempt unless expressly excluded.

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