1960 (8) TMI 2 - SC - Income Tax

Whether the exemption granted by the notification covers the case? Held that - Once there is this extension of the business of a co-operative society, the general words of the notification include the profits from such business within the exemption, and it would require more than a supposed underlying intention to negative the exemption. To gather the meaning of the notification in the light of an alleged intention is to reverse the well-known canon of interpretation. In our opinion, the profits were exempt under the notification, and the answer to the question ought to have been in the affirmative.Appeal allowed.

Summary

Issues:
Interpretation of a notification for exemption of income tax on profits made by a co-operative society from trading in controlled commodities.

Analysis:
The case involved an appeal against the judgment of the High Court regarding the exemption of income tax on profits made by a co-operative bank from trading in controlled commodities. The bank claimed exemption under a notification issued under the Income-tax Act, but the Income-tax Officer included the income in the assessment. The key question was whether the profits made by the bank were exempt under the notification. The notification exempted profits of a co-operative society, but there was a dispute over whether profits from trading with outsiders were covered. The Income-tax Officer argued that the profits were not from a co-operative venture, and the High Court upheld this view. However, the Appellate Assistant Commissioner and the Tribunal considered the profits as those of a co-operative society and exempt from tax under the notification.

The central issue was the interpretation of the notification exempting income tax on profits of a co-operative society. The Income-tax Officer contended that the profits were not from a co-operative venture but from trading with outsiders, thus not covered by the notification. The Appellate Assistant Commissioner and the Tribunal disagreed, considering the profits as those of a co-operative society and exempt under the notification. The High Court did not express an opinion on whether the profits fell under the third item of the Explanation in the notification.

The Supreme Court analyzed the notification's language and intent, focusing on whether the profits made by a co-operative society from trading with outsiders were exempt. The Court considered the broad wording of the notification and previous interpretations before the addition of the Explanation. The Court emphasized that the profits from any business conducted by a co-operative society were covered by the exemption, irrespective of whether the business was with members or outsiders.

The Court rejected the argument that the notification was limited to profits from business with members only. It highlighted that the addition of the Explanation clarified the scope of profits to include those from business activities. The Court emphasized that the notification's intent was to exempt profits from any business conducted by a co-operative society, regardless of the counter-arguments based on underlying intentions or previous case law interpretations.

Ultimately, the Supreme Court allowed the appeal, ruling in favor of the co-operative bank and holding that the profits were exempt under the notification. The Court awarded costs to the appellant and overturned the High Court's judgment.