AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
1960 (2) TMI 8
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....to the respective assessment years 1946-47, 1947-48 and 1948-49. These sums were not assessed when assessment was made under section 23(3) of the Income-tax Act, but subsequently under section 34 they were assessed as being " income " under the head " other sources." This order was upheld by the Appellate Assistant Commissioner and by the Income-tax Appellate Tribunal. A case was then stated to the High Court under section 66(1) of the Act, but was decided against the appellant. The appellant brought three appeals in this court in regard to the three assessment years. In each one of them the respondent is the Commissioner of Income-tax, Bihar and Orissa. As the appeals involve a common question of law they were consolidated and can conveniently be disposed of by one judgment. In its return the appellant showed these various sums as " other sources," but nothing turns on the manner in which the appellant chose to show this income in its return. The Income-tax Officer, however, assessed the interest for these three years under section 12 of the Income-tax Act, as income from " other sources." The appellant took an appeal to the Appellate Assistant Commissioner where it was contende....
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....ng necessities, but the motives of investment of surplus fund had actuated the deposits." He therefore hold that the fixed deposits with the Imperial Bank were held as an investment quite apart from the business of the appellant and the interest from these deposits was not exempt from income-tax. He further held that the exemption as to the profit of a co-operative society extended to its sphere of co-operative activities and, therefore, interest from investments was no part of the appellant's business profits exempt from taxation. Against this order an appeal was taken to the Income-tax Appellate Tribunal and it was there contended that the bank did not make the deposits as investments, but in order that cash might be available to the appellant " continuously " for the carrying on of the purposes of its business, and that the deposits were intimately connected with the business of the appellant and therefore the interest should have been held to be profits arising from the business activities of the bank, and that the finding that the short-term deposits in the Imperial Bank were separate from the appellant's banking business was erroneous. The Income-tax Appellate Tribunal, by it....
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....eason for the notification was to exempt profits accruing to a co-operative society from " carrying on business of a mutual co-operative society and upon the ground that a man cannot make profit or loss out of himself ". The ground of mutuality was not relied upon before us by the learned Solicitor-General who appeared for the respondent. So the sole question for determination is whether the investment by a co-operative bank of its assets in fixed deposits in the manner that the appellant bank had deposited its moneys falls within the term " business " and is therefore assessable under section 10 of the Income-tax Act, or it is an investment the interest from which would fall under the term " other sources " and therefore within section 12 of the Income-tax Act. It was contended by the learned Solicitor-General that the finding of the Appellate Tribunal as to the nature of these deposits was one of fact. This contention is not sustainable. It has not been treated as a finding of fact either by the Appellate Tribunal or by the High Court. They have both treated it as a question of law and it is on that basis that the reference was made. The decision of the question depends on what....
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....ras Provincial Co-operative Bank case, also the income which was the subject matter of dispute was interest received by the bank from its investments in Government securities and it was held that it was not part of the income derived from its business. The Rangoon case, Commissioner of Income-tax v. Bengalee Urban Co-operative Credit Society, was also a case relating to income derived from interest on capital invested in Government securities. At page 128, Page, C.J., said : "... and prima facie therefore neither interest from securities nor income derived from property are ' profits ' within the meaning of that term as used in the notification ... It may be that the investment of capital in properties or securities is part of the business of an assessee, and in such a case, in my opinion, the net income accruing from such investments would be, and be chargeable as profits of the business." [As the matter had not been considered from this point of view the case was sent back for doing so.] These cases before the amendment of the notification show that the income which was exempted was profit from business and not income from sources which fell under sections 8 and 9 of the In....
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.... on of its banking business. The Privy Council in Punjab Co-operative Bank Ltd. v. Commissioner of Income-tax, where the profits arose from the sale of Government securities, pointed out at page 645 that in the ordinary cases the business of a bank essentially consists of dealing with money and credit. Depositors put their money in the bank at a small rate of interest and in order to meet their demands if and when they arise the bank has always to keep sufficient cash or easily realisable securities. That is a normal step in the carrying on of the banking business. In other words " that is an act done in what is truly the carrying on or carrying out of a business ". It may be added that another mode of conducting the business of a bank is to place its funds in deposit with other banks and that also is to meet demands which may be made on it. It was however argued that in the instant case the moneys had been deposited with the Imperial Bank on long term deposits inasmuch as they were deposited for one year and were renewed from time to time also for a year ; but as is shown by the accounts these deposits fell due at short intervals and would have been available to the appellant had ....