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TMI Blog1961 (8) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... lso derives loss in some years and profits in some years from its banking business. For the assessment years 1945-46 and 1946-47, the income from the two sources was cumulatively considered under the head "business" both by the assessee and by the department. In 1947-48 and 1948-49, the assessee continued to show all his income from all sources under the head "business". But the department proceeded to make the assessment determining the income under two separate appropriate heads, namely, (i) interest on securities under section 8 and (ii) income from the head "business" under section 10 of the Act. Accordingly, for the assessment year, 1949-50, the assessment was made as follows : Rs.A. P. Interest on securities 8,488-0-0 Business loss 64,400-0-0 Net loss ... 55,912-0-0 In the three succeeding years, the department accordingly showed the income under the two separate heads and allowed set-off only regarding the income which the department classified under the head "interest on securities", that is, interest received from its investment in Government securities. The department refused to agree with the contention of the assessee bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding interest on securities held by the assessee." Their Lordships of the Calcutta High Court answered that question in the negative. It may be observed that the question so decided by the Calcutta High Court was substantially the same as the question which has been referred to us in the present case. The above decision of the Calcutta High Court was taken up on appeal to the Supreme Court. The latter pronounced judgment on May 23, 1957, which was after the Tribunal made the reference to us in this case (It was of date February 28, 1957). In that decision, United Commercial Bank Ltd. v. Commissioner of Income-tax [1957] 32 ITR 688 ; [1958] SCR 79, their Lordships of the Supreme Court observed as follows : "Counsel for the assessee on the other hand submits that the use of the word 'same' signifies the identity of the business in which the loss has occurred and has no reference to the head under which the profits are chargeable. In other words interest does not cease to be profits and gains of the same business merely because for the purpose of chargeability it falls under a different head, i.e., under section 8 and not under section 10. Section 24 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e securities (from which it received interest) was as much the assessee's business as receiving deposits from clients and withdrawals by them ?" The learned advocate for the petitioner contends that as per the amendments which have been made to section 24(2) in 1955 (after the reference was made) and in 1957, the assessee would be entitled to set off the loss of ₹ 55,912 not only against the profits of banking business but also against profits from interest on securities. But this is a point which has not been referred to us by the Tribunal under section 66(1) of the Income-tax Act and we cannot go into such question now. It is open to the assessee to press this contention also before the Tribunal when the matter goes before it. There shall be no order as to costs. In pursuance of the aforesaid order, the Income-tax Appellate Tribunal, Hyderabad Bench, submitted the following fuller statement of the case: "In compliance with the requisition of the High Court of Judicature, Andhra Pradesh, at Hyderabad, under section 66(4) of the Indian Income-tax Act, 1922, in Case Referred No. 25 of 1957, dated December 20, 1959, in the case of Cocanada Radhaswami Bank Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of example. For instance, the eighth annual report on the working of the assessee bank for the period ended 31st December, 1950, is as follows. In the second paragraph it is stated : The paid up capital of the bank is ₹ 1,00,400. The working capital at the end of the year was ₹ 9,08,408 which was utilised as shown below: Rs. (1)Money at call and short notice 59,138 (2)Fully secured loans 95,965 (3)Loans secured by personal security 20,647 (4)Loans secured by personal security as well as personal liability of one or more parties 1,38,379 (5)Government securities at cost 4,62,662 (6)Cash in hand and with banks 71.311 (7)Other assets 15,101 Total 8,63,203 The fifth item, which pertains to Government securities, is important. On the basis of Government securities being included in the working capital, it was argued on behalf of the assessee that its contention was correct. A copy of this eighth annual report of the working of the assessee bank is annexure "A" hereto forming part of the case. The assessee also filed before us a statement wherein the particulars of paid up capital, total working capital, etc., are given. A perusal of it al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... working of the Cocanada Radhaswami Bank Limited, Kakinada, for the period ended 31st December, 1960: 1.The directors beg to submit their eighth annual report for the year ended 31st December, 1950, together with the profit and loss account and the balance-sheet. 2.The paid-up capital of the bank is ₹ 1,00,400. The working capital at the end of the year was ₹ 9,08,408 which was utilised as shown below: Rs. (1)Money at call and short notice 59,138 (2)Fully secured loans 95,965 (3)Loans secured by personal security 20,647 (4)Loans secured by personal security as well as personal liability of one or more parties 1,38,379 (5)Government securities at cost 4,62,662 (6)Cash in hand and with banks 71,311 (7)Other assets 15,101 Total 8,63,203 3. The following figures indicate the progress of the bank during the year under report as compared with the previous years: Year ending Total work-ing capital Total demand and time liabilities Loans, cash credits and overdrafts Total liquid assets Ratio of 5 : 3 Rs. Rs. Rs. Rs. 30-4-46 10,32,771 9,46,862 4,91,699 5,17,321 60% 30-4-47 10,52,118 10,45,560 4,99,695 6,38,154 61% 30-4-48 14,65,415 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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