TMI Blog1953 (5) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... h Edition, Part II, pages 257-258)? The assessee, the Hoshiarpur Central Co-operative Bank, Limited, Hoshiarpur, was registered under Section 9 of the Co-operative Societies Act, and the objects as mentioned in the bye-laws are:- 1. The carrying on of banking and credit business; 2. The purchase and sale for common account of agricultural implements and produce; 3. The supervision and audit of registered co-operative societies; 4. The provision of education assistance to members of such asocieties; 5. Other measures designed to improve the work and extend the usefulness of such societies . It appears that due to reasons which are not disclosed but can well be imagined the Government authorised the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the exemption given by a notification under Section 60 dated the 26th of August, 1925, as amended on the 25th of June, 1927, they would have been liable to income-tax. This notification is as follows:- (2) The profits of any co-operative society other than the Sani-katta Salt Owners' Society in the Bombay Presidency for the time being registered under the Co-operative Societies Act, 1912 (II of 1912), the Bombay Co-operative Societies Act, 1925 (Bombay Act VII of 1925) or the Madras Co-operative Societies Act, 1932 (Madras Act VI of 1932) or the dividends or other payments received by the members of any such society out of such profits. Explanation-For this purpose the profits of a Co-operative Society shall not be deemed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk, Limited v. Commissioner of Income-tax (1929) ILR 53 Mad. 640, a Co-operative Society was by an order of Government required to keep 40 per centum of its total liability under call deposits in a liquid of fluid form and the Society invested it in Government security which produced interest. It was held that in the absence of proof that such investments are obligatory on the Society or are a part of its usual business, the interest on the securities was not part of the profits of the business of the Society. At page 647 of the judgment it is observed:- The obligation on the bank to keep 40 per cent, of its total liabilities in a fluid form is in consequence of an administrative order of Government and does not oblige them, although i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business disappears . and Bardswell, J., said:- I agree that the interest derived by a Co-operative Bank from its investments in Government securities is not to be regarded as part of the profits of its business qua such bank. I would take it that the exemption is meant as an encouragement to the employing of as much capital as possible for the financing of Co-operative Societies and to extending the scope of co-operation. The investing of money in Government securities does not further the cause of co-operation but is only a means of keeping from lying idle funds that cannot immediately be used for such a purpose . The Rangoon High Court in In re Commissioner of Income-tax, Burma v. Bengalee Urban Co-operative Credit Society, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;the surplus by which the receipts from the trade or business exceed the expenditure necessary for the purpose of earning those receipts.' In my opinion, the term 'profits' in the notification of 25th August, 1925, is used in this latter sense 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 . I may now refer to some of the English cases which have some relevance to the facts of the present case. In Carlisle and Silloth Golf Club v. Smith [1913] 3 K.B. 75the appellants were ordinary members of a golf club. In addition to the members of the club, who were entitled on payment of an annual subscripti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 81. In that case the Life Insurance Company had no shareholders. The only members were the holders of participating policies. A calculation was made by the company of the probable death rate among the members and of the probable expenses and other liabilities. An account was annually taken and the greater part of the surplus of such premiums over expenditure referable to these policies was returned to the policy holders as bonuses. The remainder was carried forward as funds in hand to the credit of the general body of the members. It was held that no part of the premium income received under participating policies was liable to be assessed to income-tax as profits or gains and that Last v. London Assurance Corporation (1885) 10 App. Gas. 43 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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