TMI Blog1973 (10) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... tive society carrying on banking business. The submission on behalf of counsel for the assessee is that the Banking Regulation Act, 1949, has been made applicable to the assessee and that the banking business as defined in section 5A of the Banking Regulation Act, 1949, read with the provisions in section 6(1)(a) and (1) of the same Act detailing the forms of business, taken along with the compulsion imposed on the assessee by section 24 of that Act, clearly indicate that the holding of securities, the realisation of those securities, the earning of interest from those securities, all spell carrying on of the business of the banking institution and that, therefore, the interest that is accrued on the securities should be treated as business income. This submission naturally implies that the securities held by the assessee is stock-in-trade. Counsel for the revenue, Sri P. A. Francis, pointed out that the assessee is not entitled to proceed under that assumption as the Tribunal has definitely found that the securities held by the assessee are not stock-in-trade and that question is a pure question of fact, and that question not having been referred to this court we are precluded fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned from securities under section 80P(2)(a)(i) of the Act is exclusively based on the inability of the assessee to discharge the burden that the securities were really stock-in-trade. A reading of the order of the Tribunal as a whole indicates that this burden will get discharged only in cases where the banking institution had been able to establish that as a matter of practice it had been selling and buying securities or dealing with it otherwise often, if not frequently, as if buying and selling securities formed its basic or essential business. We think this is a completely wrong approach to the question. A banking institution, as we understand it, as a part of its business activity will have to have ready resources to meet its liabilities the extent of which can never be foreseen. It must, therefore, have liquid resources which of course will normally be cash, and, secondly, easily realisable securities. This is in the interest of the banking institution and it is in the interest of the public that deal with the bank. Taking the latter aspect into consideration the legislature has stepped in and has made it obligatory that the banking institutions must maintain a certain pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of the circulating capital of the appellant nor would they cease to form part of its banking business. The returns flowing from them would form part of its profits from its business. In a commercial sense the directors of the company owe it to the bank to make investments which earn them interest instead of letting moneys lie idle. It cannot be said that the funds of the bank which were not lent to borrowers but were laid out in the form of deposits in another bank to add to the profit instead of lying idle necessarily ceased to be a part of the stock-in-trade of the bank, or that the interest arising therefrom did not form part of its business profits." The so-called finding of the Tribunal is not a finding after considering any evidence in the matter but, as we indicated, arose out of an assumption that even in the case of a banking institution the securities held by a banking institution which it is required by law to maintain, in the absence of proof of dealing with those securities, was capital and not stock-in-trade. This is a clearly erroneous view of law and, therefore, we think that it is not the decision of the Supreme Court relied on by counsel for the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the business, the different heads of income being only the classification prescribed by the Indian Income-tax Act for computation of income." In the decision of the Supreme Court in Commissioner of Income-tax v. Cocanada Radhaswami Bank Ltd., it is stated : " The Act provides for the setting off of loss against profits in four ways. To illustrate, take the head 'profits and gains of business, profession or vocation'. An assessee may have two businesses. In ascertaining the income in each of the two businesses, he is entitled to deduct the losses incurred in respect of each of the said businesses. So calculated, if he has loss in one business and profit in the other both falling under the same head, he can set off the loss in one against the profit in the other in arriving at the income under that head. Even so, he may still sustain loss under the same head. He can then set off the loss under the head 'Business' against profits under another head, say 'Income from investments', even if investments are not part of the trading assets of the business. Notwithstanding this process he may still incur loss in his business. Section 24(2) says that in that event he can carry forwar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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