State Government securities and tax-free interest under the Income-tax Act were brought within section 8 with proviso relief.

Interest on securities issued by the erstwhile States of Travancore and Cochin was treated as interest on "securities of the State Government" under section 8 of the Income-tax Act, 1922, because the provision expressly covered State Government securities and there was no basis to substitute a different meaning from the General Clauses Act. The securities, having been issued before 15 August 1947 and being tax free, fell within the third proviso to section 8. The effect was that such interest was assessable under section 8, while the assessee remained entitled to the statutory exemption available under the proviso.

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Issues: Whether interest on securities issued by the erstwhile Indian States of Travancore and Cochin was assessable under section 8 of the Indian Income-tax Act, 1922 or under section 12 of that Act.

Analysis: Section 8 of the Income-tax Act, 1922 charged tax on interest receivable on securities of the Central Government or of the State Government, and its third proviso exempted interest on a State Government security issued income-tax free. The securities in question were issued by the Indian States before 15 August 1947 and were tax free. The expression used in section 8 was "securities of the State Government", and there was no warrant for substituting a different expression based on the General Clauses Act. The issue was covered by the earlier decision concerning Hyderabad State securities, which treated similar pre-Constitution State securities as falling within section 8.

Conclusion: The securities issued by the erstwhile Indian States of Travancore and Cochin were assessable under section 8 of the Income-tax Act, 1922, and the assessee was entitled to the benefit of the proviso.

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