Law:

Section:

Section 2(5), read with Rule 4(2) of Schedule I to the Excess Profits Tax Act, 1940 - Banking business - Computation of profits - Whether where assessee was carrying on banking business, profits for assessment in its case must include all income received from investments whether investments were in shares, securities or immovable properties - Held, yes FACTS The assessee carrying on banking business, also made certain investments in shares and securities and happened to acquire certain immovable property. The question arose whether the income from the investment in shares and securities and immovable property could be legally assessed to excess profits-tax and the Tribunal held that it could be taxed as these investments were only expansion of the banking business and were the assets of such business. On this finding the Tribunal was of the view that the business activities of the company were covered by definition of the word "business" as given in section 2(5) and held that under clause (2) of rule 4 of the Excess Profits-tax Rules incorporated in Schedule 1 to Excess Profits-tax Act, the income of the assessee arising from investments made in the course of the banking business and the income derived from the rentals of the immovable properties was chargeable to excess profits tax. On reference: HELD Rule 4(2) of Schedule I makes it clear that in the case of (1) a business of building society, (2) a money-lending business, (3) a banking business and (4) an insurance business, income received from investments must be included in the profits for the purpose of assessment of excess profits-tax and no question arises in such cases whether the business consists wholly or mainly in dealing in or holding of investments. It is only when the business of the assessee does not fall within any of these classes that the Act requires that the business should consist wholly or mainly in dealing in or holding of investments in order to make the income from the investments liable to be included in profits for the purposes of assessment. In the instant case since the assessee was carrying on banking business, the profits for the assessment of excess profits-tax must in its…

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