1967 (11) TMI 11

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....urities held by the society as its stock-intrade qualified for exemption under Notification No. F.D. (C.R.) R.Dis. No. 291-I.T/25 dated August 25, 1925, issued under section 60 of the Income-tax Act, and the High Court.of Bombay agreed with that view in a reference under section 66(1) of the Income-tax Act. The Commissioner has appealed against the order passed by the High Court. The Income-tax Act, 1922, before it was amended by the Finance Act, 1955, contained no provision for exempting the income or profits earned by a co-operative society from liability to pay tax. But the of India issued a notification in exercise of the power under section 60 of the Indian Income-tax Act, granting exemption in respect of the profits of the co-opera....

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....e exemption under the notification applied to interest earned by a co-operative society from Government securities held by it as its stock-in-trade : it was inapplicable only to interest received from Government securities held by the society as investments. By the plain terms of the notification, exemption was granted in respect of " the profits of any co-operative society " : it was not granted merely in respect of the profits of the society computable under section 10 of the Indian Income-tax Act. The expression " classes of income " in the opening part of the notification was intended to designate particular categories intended to be exempted. The profits received by a co-operative society, whatever may be the method of computation, ....

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....as intended to be excluded from the benefit of the exemption, the expression " investments in " in the Explanation was wholly unnecessary. In Surat Peoples' Co-operative Bank Ltd. v. Commissioner of Income-tax the Bombay High Court held that the word " investment " in the Explanation to the notification related only to such securities as did not form part of the stock-in-trade of the co-operative society, and since, in that case, the securities did form part of the stock-in-trade of a co-operative bank, the profit made by sale of the securities was not taxable. This view was apparently accepted by this court in Bihar State Co-operative Bank Ltd. v. Commissioner of Income-tax. In Bihar State Co-operative Bank's case, the appellant-society....