Bank's forfeited margin money constitutes income under normal banking operations.

The Supreme Court held that forfeited margin money by a bank should be treated as income earned during normal banking operations. The bank's practice of taking margin money before purchasing securities was integral to its profit-making process. The Court ruled that the bank's income would arise upon selling or redeeming the securities and that the cost of securities should not be reduced by forfeited margin money. The Court allowed the appeal, setting aside the High Court's judgment, and answered the question in the negative, favoring the Revenue.

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Issues:
- Treatment of margin money forfeited by a bank as income for taxation purposes.
- Whether a bank can adjust forfeited margin money against the cost of securities purchased on behalf of constituents.

Analysis:
The case involved the treatment of margin money forfeited by a bank as income for taxation purposes and the permissibility of adjusting forfeited margin money against the cost of securities purchased on behalf of constituents. The bank purchased securities for constituents, receiving margin money as advance payment. If constituents failed to pay the balance amount by the due date, the bank forfeited the margin money and adjusted it against the purchase price of the securities. The Income-tax Officer treated the forfeited margin money as income, but the Tribunal allowed the adjustment. The High Court held that the bank could adjust forfeited margin money against the cost of securities, considering it as part of the profit-making process. It ruled that the bank's income would arise upon selling or redeeming the securities. The Supreme Court disagreed, stating that forfeited margin money should be treated as income earned during normal banking operations. The bank's practice of taking margin money before purchasing securities was integral to its profit-making process. The bank's ownership of securities and forfeited margin money occurred simultaneously, justifying the adjustment. However, the Court emphasized that the cost of securities should not be reduced by forfeited margin money. The bank's income accrued when the margin money became its own, and such income could not be deferred by adjusting it against the cost of securities. The Court allowed the appeal, setting aside the High Court's judgment, and answered the question in the negative, favoring the Revenue.

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