HOSHIARPUR CENTRAL CO-OPERATIVE BANK LTD. vs. COMMISSIONER OF INCOME-TAX, SHIMLA

CIVIL APPEAL No. 238/1955Supreme Court[1961] 1 S.C.R. 10702 August 1960Bench: 3 JudgesAuthor: S.K. DAS, M. HIDAYATULLAH, J.C. SHAH7 pages
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What were the facts?

The appellant, Hoshiarpur Central Co-operative Bank Ltd., is appealing a judgment of the Punjab High Court concerning assessment years 1948-49 and 1949-50. The Income-tax Officer had included profits from trading in controlled commodities (sugar, cloth, kerosene) in the Bank's assessment. The Bank claimed exemption under a notification issued under Section 60 of the Income-tax Act, 1921. The Appellate Assistant Commissioner reversed the ITO's decision, but the Appellate Tribunal reversed that, referring a question to the High Court. The High Court answered the question against the Bank, but certified the case for appeal to the Supreme Court. The core dispute is whether profits from trading in controlled commodities, with the approval of the Registrar of Co-operative Societies, are exempt from tax under the said notification.

What did the Supreme Court hold?

The Supreme Court held that the profits earned by the Hoshiarpur Central Co-operative Bank Ltd. from trading in controlled commodities with the approval of the Registrar of Co-operative Societies are exempt from tax under the notification. The Court reasoned that the wording of the notification, specifically item 2, is wide enough to encompass profits from any business carried on by a co-operative society, not just those with its members. The Court found that the Bank is a co-operative society and is claiming exemption as such for profits from its business. The Court rejected the revenue's argument that the underlying intention of the Co-operative Societies Act and bye-laws should restrict the interpretation of the notification, stating that such an intention cannot negate the plain and general words of the notification. The Court noted that it was always open for the government to allow societies to extend their business operations to trading with non-members, as had happened in this case. The ratio decidendi is that general words in a tax exemption notification should be interpreted broadly, and a supposed underlying intention cannot override clear statutory language. The appeal is allowed with costs.

What were the issues?

1. Whether profits earned by a co-operative bank from trading in controlled commodities, with the special permission of the authorities, are exempt from tax under item 2 of the Government of India Notification F. D. (C. R.) Notification R. Dis. No. 291-I. T/25 dated August 25, 1925, as subsequently amended (Income-tax Manual, 10th Edition, Part II, pages 257-258)? This is a question of mixed law and fact, turning on the interpretation of the notification and its application to the facts. The assessee (Bank) contends that the notification's wording is broad enough to include profits from such trading activities, even with non-members, as long as the business is conducted with the approval of the Registrar. The revenue (Commissioner of Income-tax) argues that the exemption under the notification is limited to profits made by a co-operative society in its business with its own members, within the framework of the Co-operative Societies Act, 1912, and its bye-laws. The revenue relies on observations in cases like The Madras Central Urban Bank Ltd. v. Commissioner of Income-tax, The Madras Provincial Co-operative Bank Ltd. v. Commissioner of Income-tax, and Commissioner of Income-tax, Burma v. The Bengalee Urban Co-operative Credit Society Ltd.

Which sections of the Income-tax Act were involved?

Section 60,Section 66(1),Section 66A(2),Section 12,Section 10,Section 8,Section 31

AI-generated summary — verify with the full judgment below

1 S.C.R. SUPREME COURT REPORTS 107 carry on or renew the proceedings. In this case, it is '960 not necessary to pronounce upon the question whether P-;;n--;;i, dissolution of the House necessarily has the effect of M. s. M. Sharma completely wiping out the contempt or the proceedings v. relating thereto.

Dr .. Shree Krishna In· our opinion, for the reasons given above, no Sinha & Others grounds have been made out for the exercise by this Sinha c. J.

Court of its powers under Art. 32 of the Constitution.

The petition is accordingly dismissed.

There will be no order as to costs.

Petition dismissed. HOSHIARPUR CENTRAL CO-OPERATIVE BANK LTD. v. COMMISSIONER OF INCOME.TAX, SIMLA. (8. K. DAS, M. HIDAYATULLAH, and J. c. SHAH, Jj,)

Income-tax-Co-operative Society-Profits earned in business with non-members-Whether exempt from tax-Income-tax Act, I92I (IX of I92I), s. 60, notification.

The assessee Bank, which was a _co-operative society, did business is controlled commodities with the approval of the Registrar of Co-operative Societies and earned profits.

It claimed that these profits were also exempt from taxation under F. D. (C. R.) Notification R. Dis. No

The order continues below.

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