Law:

Section:

Section 80P of Income-tax Act, 1961 [Corresponding to section 14(3), read with section 8 of the Indian Income-tax Act, 1922] - Deductions - Income of co-operative societies - Assessment years 1958-59 and 1959-60 - Claim of assessee, co-operative society carrying on business of banking, for deduction of interest on Government securities held in course of its business was disallowed by department on ground that its income exceeded Rs. 20,000 and it was neither a housing society or urban consumer's society or society carrying on transport business - Whether interest on securities earned by assessee was exempt from tax under clause (i) of section 14(3) of 1922 Act as securities were held by it as stock-in-trade - Held, yes FACTS The assessee, a co-operative society was carrying on the business of banking which was providing finance to its own members and occasionally it provides banking facilities to non-members. It held Government securities in the course of its banking business and earned interest from them. For the assessment years 1958-59 and 1959-60, the assessee claimed that interest so received was exempt from the liability to pay income-tax on them by virtue of section 14(3)(i) of 1922 Act. The case of the Commissioner was that the income was chargeable under section 8 of 1922 Act and that, since its total income exceeded Rs. 20,000 and it was not a housing society or urban consumers' society or a society carrying on transport business, it was not entitled to the benefit of clause (iv) of section 14(3) and that clause (i) was not applicable to income from interest on securities. On appeal, the Tribunal held that the assessee was not entitled to the exemption from tax. On reference : HELD Income, profits and gains have been divided into six heads enumerated in section 6 of 1922 Act for the purpose of assessing the taxable amounts of different kinds of income, profits and gains. Income from different sources is to be computed in different manner and, therefore, for the purpose of assessing the taxable amount income is divided into six heads. The heads are mutually exclusive and for the purpose of assessing the taxable amount an income must be placed under…

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