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TMI Blog1953 (1) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to exempts from income-tax :- "The profits of any Co-operative Society other than the Sanikatta Salt Owners' Society in the Bombay Presidency for the time being registered under the Co-operative Societies Act, 1912 (11 of 1912) or the dividends or other payments received by the members of any such Society on account of profits". The assessees invest large sums received by them in Government securities and the income derived from such investments has been assessed to income-tax. The main objects of the Society as set out in its bye-laws, are (1) to collect funds for financing Cooperative Societies, (2) to serve as the Provincial Apex Bank for the province of Madras, (3) to purchase and sell Government Promissory Notes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest derived from such securities must, of course, be taken as an item of receipt in arriving at the society's profits and gains from the business but it does not, however, follow from this that the interest is a profit of the society. It is contended by the Commissioner of Income-tax that interest on Government Securities has always to be taxed under s. 8 of the Indian Income-tax Act, whereas the profits of business have always to be taxed under s. 10 of the Act, and that it is the latter profits alone that are exempt under the notification. The Indian Income-tax Act in s. 6 states the heads of income chargeable to income-tax as follows :- 1.Salaries. 2.Interest on Securities. 3.Property. 4.Business. 5.Professional earnin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the case. The point of course is not that a continuous practice following legislation interprets the mind of the Legislature, but that when you find legislation following a continuous practice and repeating the very words on which that practice was founded, it may perhaps fairly be inferred that the Legislature in re-enacting the statute intended those words to be understood in their received meaning. And perhaps it might be argued that the inference grows stronger with each successive re-enactment". There is nothing new in the exemption contained in the Government notification. For years, the practice has been to interpret "profits" as not including interest on Government Securities. Since 1904 such interest has alw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety that this was a part of the business of the Bank and that unless this interest was received the activities of the Bank would be seriously handicapped-exactly the same contention has been put forward here-and it was held that this investment in Government securities was not a part of the business of the Bank but that such investment fell under s. 8 of the Act. In the course of the judgment reference is made to some English decisions, two of which were relied upon here by Mr. Subbaraya Ayyar, for the assessees, viz., Norwich Union Fire Insurance v. Magee [1896] 3 Tax. Cas. 457 and Liverpool and London Globe Insurance Company v. Bennett [1913] 6 Tax. Cas. 327 . In the former case the company besides carrying on business in the United King ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o meet the liabilities of their business and that the making of the investments was just as much part of their mode of conducting the business as the taking of risks and in the event of the current account at the bank being insufficient to meet the liabilities all the investment funds might have to be called upon at some time or other. The object of the investments was to extend the business, so the making of them was part of the business. This the Full Bench held clearly distinguished Liverpool and London Globe Insurance Company's case (supra ) from the case before them. The Full Bench judgment goes on as follows :- "It seems to me impossible, at least without a great deal more information than has been presented to us, to say t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Cornish J.-I am of the same opinion. I think there is no real substantial distinction between this case and Madras Central Urban Bank Ltd., Mylapore's case (supra ). The exemption from income-tax given by the notification is to the profits made by the petitioner from its business of a Co-operative Bank. Unless, therefore, the interest derived by the bank from its money invested in Government Promissory Notes can be regarded as profits from the business carried on by the Bank it will not be exempt from tax. The petitioner relies on R. 1 of the bye-laws which states that one of the main objects of the Bank is "to purchase and sell Government Promissory Notes". Taking this to mean that the Bank has been empowered to deal in Go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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