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Issues:
1. Whether the assessee, a cooperative society engaged in life insurance business, is exempt from income tax under a notification issued by the Central Government under Section 60 of the Indian Income-tax Act. Analysis: The judgment addresses the issue of whether the B.B.&C.I. Railway Co-operative Mutual Death Benefit Society for Indian Staff, Limited, Bombay, is exempt from income tax under a notification issued by the Central Government. The crux of the matter lies in interpreting the notification and its applicability to cooperative societies engaged in insurance business. The Income-tax Act specifies that the profits of any business of insurance carried on by a mutual insurance association are considered income for tax purposes. However, a special method of computing these profits is outlined in Section 10(7) of the Act, which substitutes the provisions contained in Sections 8, 9, 10, 12, or 18 with rules in the Act's Schedule. The Schedule's Rule 2 dictates the computation of profits and gains of life insurance business. In this case, the profits of the society are to be computed as gross external incomings less management expenses. The Central Government, under Section 60 of the Act, has the power to exempt certain classes of income from tax through a notification. The notification at hand exempts the profits of cooperative societies, with an explanation excluding specific types of income. The dispute arises from whether the society's profits are wholly exempt or subject to taxation based on the explanation's applicability. The first contention raised is that the profits of the assessee company cannot be wholly exempt under the notification as only profits falling outside the explanation are exempt. However, this argument is deemed fallacious as the explanation applies to income falling under specific heads, whereas the society's income is not categorized under different heads but computed as a single unit as per the Schedule to the Act. Therefore, the explanation does not apply to the society's case. The second argument questions whether the notification applies to an insurance company like the assessee. It is argued that the notification's language implies it applies to entities with multiple classes of income, which an insurance company may lack. However, the judgment interprets "classes of income" as broader than "heads of income," encompassing categories of income. Thus, the notification is deemed applicable to cooperative societies, including those engaged in insurance business. In the case of insurance companies, the entire income is exempt as the explanation does not apply to them. Therefore, the notification applies to both cooperative societies not engaged in insurance business and those involved in insurance business, exempting profits based on the explanation's scope. In conclusion, the judgment affirms that the assessee, a cooperative society engaged in life insurance business, is exempt from income tax under the notification issued by the Central Government. The notification applies to cooperative societies, including those conducting insurance business, and exempts their profits based on the explanation's applicability. The judgment rules in favor of the assessee, affirming the exemption of their profits from taxation and directing the Commissioner to pay the costs.
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