TMI Blog1985 (10) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... cting collection charges. The statement of the case shows that these securities were pledged by the assessee to banks under letters of pledge containing power of sale. The contention of the assessee before the Income-tax Officer was that in respect of its securities held by the banks as aforesaid, the interest or income which the banks passed on to them should be considered as " Income from business " and not under the head of income " Interest on securities " for the purpose of assessment. The Income-tax Officer concerned treated this income as interest on securities falling under section 18 of the Income-tax Act, 1961, and taxed it as such in the hands of the assessee. On appeal from this order, the Appellate Assistant Commissioner took the view that it was only interest on securities held in the name of the assessee which was liable to be treated as interest on securities and that in respect of the securities of the assessee held by banks as aforesaid, the income from the same received by the assessee should be treated as income from business. The Revenue preferred appeals against this decision of the Appellate Assistant Commissioner to the Income-tax Appellate Tribunal. The Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Supreme Court in United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688, which took the view that income from interest on securities falls under section 8 of the Indian Income-tax Act, 1922, and is not business income falling under section 10, even though the securities are held by dealer as his stock-in-trade, and this court followed the said decision. The Division Bench of this court which decided the aforesaid case has pointed out (at p. 589) that the view taken by the Supreme Court was that the sections dealing with the heads of income are mutually exclusive and where an item of income falls specifically under one head, it has to be charged under that head and no other and that income from "interest on securities " falls under section 8 of the Indian Income-tax Act, 1922, and not under section 10. It cannot be brought under a different head of income, namely, " profits and gains of business " under section 10, even though the securities are held by a banker as part of his trading assets in the course of his business. Although the said decision of this court as well as the decision of the Supreme Court referred to above have been rendered in connection with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounting periods 1942, 1943 and 1944, in the shape of Government of India securities of the face value of Rs. 38,43,000 and the balance by cheque. All the securities were tendered to the Accountant-General, endorsed in his favour and continued to stand in his name so long as they formed part of the Baroda Excess Profits Fund in accordance with clause 4 of the Ordinance. Interest on these securities was realised by the Accountant General and the certificates of deduction of tax were also issued in his favour. Ultimately, on November 7, 1947, a sum of Rs. 40,51,351 was directed to be refunded and oat of the sum so refunded, the Income-tax Department sought to assess a sum of Rs. 28,718 as business income. This amount represented the interest paid on these securities during the period they were held by the Accountant-General. The assessee claimed that the said amount represented interest on securities covered under section 8 of the Indian Income-tax Act, 1922, and the assessee was entitled to credit for tax deducted in respect thereof under section 18 of that Act. It was held that as the securities were transferred in the name of the Accountant-General and became investments of the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income being only the classification prescribed by the Income-tax Act for computation. This decision also does not carry any further the submission of Mr. Mehta. In that case, the question was not under which head the interest on securities earned by the assessee was to be taxed, but whether the assessee was entitled to exemption under section 25(3) in respect of interest on securities, which was a different question altogether. In fact, in that decision, the Supreme Court reaffirmed the correctness of the decision in United Commercial Bank Ltd. v. CIT [1957] 32 ITR 688 and reaffirmed the principle that the various heads of income, profits and gains enumerated in section 6 are mutually exclusive, each head being specified to cover the income arising from a particular source, and consequently " interest on securities ", which is specifically made chargeable to tax under section 8 as a distinct head, falls under that section and cannot be brought under section 10, whether the securities are held as trading assets or capital assets. We are unable to accept the argument of Mr. Mehta. As we have pointed out earlier, the income in question in this case was interest on securities. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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