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. 291-I. T./25 dated August 25, 1925, as subsequently amended, issued under s. 60 of the Income-tax Act. This notification exempted "the profits of any co-operative society." from tax. It was urged for the Depart- ment that these words referred to profits made by a co-perative society in its business as a pure co-operative society, i.e., ifLbusi. ness with its own members. within the four corners of the Co- operative Societies Act, 1912, and the bye-laws made thereunder. Held, that the said profits were exempt from tax. The
words of the Notification were wide enough to include profits of business of a co-operative society in transactions· with non- members also. It was always open to the appropriate Govern- ment to allow a society to exten<f its business operations to trad- ing with persons other than its members. Once there was such z960
. August 2. [19fll] 19~0 extension, the profits of the society from such business fell with- in the general words of the :\otification an<l it required more 11,,,1i1arp10· than a supposed underlying intention to negative the exemption. Cc,z/ral –
Tl1t Madra5 Central Urban Banh Ltd. v. Commissioner of Co-of'trati1·1: ) I M d 6 r. Rank Ud. Income-tax, (1929 .L.R. 52. a . 40, ". R., The Madras Provin- cial Co-<>Perative Bank Ltd. v. Commissioner of lncomr-tax, (1933) . v.
I I.L.R. 56 ~lad. 837 F. B. and Commissioner of Income-ta~. Burma ;;;;;,;;_~:: v. The Bengalee llr~an. Co~operatit·e Credit Society Ltd., (1933) S .. 1 l.L.R. 1I Ran. 521, d1stmgmshed .
. Utl a CIVIL APPELLATE JURISDICTION: Civil Appl'al No. 238 of 1955. Appeal from the judgment n.nd order da.ted May 27, 1953, of the Punjab High Court in Civil Reference No. 3/1952.
Del!a Singh Rarulhaoo and K. L. Mehta, for the appellant. 111. C. Setalvad, Attorney-General for Irulia, K. N. Rajagopal Sastri and D. Gupta, fo~ the respondent. 1960. August. 2. The Judgment of the court was
delivered by Hidayat1<llah ]. HIDAYATULLA~ J.-This is an appeal against the judgment and order of the High Court of Punjab with the certificat~ of the Court granted under s. 66A(2) of
the Indian Income-tax Act. The Hoshiarpur Central Co-operative Ba.nk, Ltd., Hoshia.rpur, hereinafter referred to ns the Bank, is the appellant, and the Commissioner of Income-tax, Simla,
is the respondent. For the assessment yea.rs 1948.49 and 1949-50, the lncome.ta.x Officer included in,the asse~sment of the Bank certs.in income which ha.d accrued t.o the Ba.nk as profits from trading in cont-
rolled commodities like suga.r, cloth, kerosene, etc., which the Ba.nk wa.s allowed to deal in, with the app- roval of the Registrar of Co-operative Societies con- veyed in a letter dated September 28, 1954. The Bank
claimed exemption under a. notification issued under s. 60 of the Income-tax Act, but the contention was not accepted. On appeal, the Appellate Assista.nt Commissioner reversed the decision, which, on further
appeal, was reversed by the A ppella.te Tribunal, Delhi Branch. The Appellate Tribunal, however, raised, 1 S.C.R. SUPREME COURT REP,ORTS and referred the following question to the High Court
under s. 66(1) of the Income-tax Act: "Where a co-operative Bank deals in sugar and standard cloth with special permission of the authori- ties and earns income from such activities, is such
income exempt from tax under item 2 of the Govern- ment of India Notification F. D. (C. R.) Notification R. Dis. No. 291-I. T/25 dated 25th August, 1925, as subsequently amended (Income-tax Manual, 10th Edi-
tion, Part II, pages 257-258) ?" The High Court answered the question against the Bank, but certified the case as fit for appeal .to this Court, and hence this appeal. It is admitted on all hands that the profits were
made from trading in cert.ain commodities with the approval of the Registrar of Cq:operative Societies. The quantum and the manner in which those profits were made, are not in dispute. The short question in
this appeal is whether the exemption granted by the notification covers the case. The notification reads as follows: "Income included in total income but exempt from both income-tax and super-tax:
The following classes of income shall be exemp- ted from the tax payable under the said Act, but shall be taken into account in determining the total income of an assessee for the purposes of the said Act :-
1. ……………. . 2. The profits of any Co-operative Society other than the Sanikatta Saltowners' Society in the Bombay Presidency for the time being registered under the Co-operative Societies Act, 1912 (II of 1912), the Bom-
bay Co-operative Societies Act, 1925 (Bombay Act VII of 1925), the Burma Co-operative Societies Act, 1927 (Burma Act VI of 1927) or the Madras Co-opera- tive Societies Act, 1932 (Madras Act VI of 1932), or
the dividends or other payments received by the members of any such society out of such profits.· Explanation : For this purpose the profits of a Co-operative Society shall not be deemed to include
any income, profits or gains from :- (i) Investment in (a) securities of the nature JI vshiarpur Central Co-operative JJank Ltd. v. Comnu·ssioner of Inconie-tax, Simla SCP~EME COCRT REPORTS
(1961] referred to in Section 8 of the Indian Income-tax Act, or (b) property of the nature referred to in Section 9 Hoshiarpur Ceni.al of tha.t Act; Co-op.,a1ive (ii) dividends, or
Hank Ll4. (iii) the ' other sources' referred to m section 12 v. of the Indian Income-tax Act." 0 "''""' 10"" of Tho Income-tax Officer held that the profits ma.de Imomt-tax, b 81,.10
Y the Ba.nk were not the profits in a. co-operative venture but from trading with outsiders, and that, Hidayalullao J. therefore, para. 2 of the notification did not cover them. He i.lso held that this income fell within
"other sources " referred to in item (iii) of the Expla- nation. The Appellate Assistant Commissioner held that these were profits of a. Co-operative Society, a.nd were within pa.Ta. 2, and were, therefore, excempt from
tax. Both the Tribunal and the High Court accepted the rea.soning of the Inoome-ta.x Officer with regs.rd to pa.re. 2, but the High Court did not express a.ny opinion a.a to whether the third item of the Expla.na.tion
a. pplierl to the case or not. Before us, the lea.med Attorney-Genera.I appearing for the Department did not put his ca.Re on the Expla.- na.tion, a.nd nothing more need be said a.bout it. It
ma.y, however, be mentioned that "other sources" there ha.s reference to the scheme of s. 6 of the Indian Income-tax Act, a.nd profits from business of what- ever kind, a.re dealt with under a. IO of the Act. The
short qllestion thus is whether pa.re. 2 is confined only to profits ma.de by a. Co-opera.ti ve Society from tra.ns- a.ctions with its own members a.nd does not cover profits ma.de in business with outsiders.
It ma.y be pointed out that there a.re some cases to be found, in which it wa.s held, before the notifitia.tion was a.mended by the addition of the Expla.na.tion, that the second pa.ra. exempted profits ma.de by a Co-
operative Society in tra.nsa.ction with its members a.nd not to profits ma.de in a.ny other wa.y. The question is whether such a. restricted meaning ca.n be imputed to the very wide a.nd genera.I terpis in w hioh pa.ra 2 is couched.
The question is pie.inly one of construction of the notification. In support of the oa.se of the Department, the learned Attorney-General relies on two arguments. He first refers to the opening words of the second para
of the notification, viz., "The profits of any Co- operative Society". These words, it is argued, refer to profits made by a Co-operative Society in its business as a pure Co-operative Society, or, in other words,. in
business with its own members within the four corners of the Co-operative Societies Act, 1912 and the bye. laws made under that Act. No doubt, a Co-operative Society primarily exists
for business with members and not for business with non-members; but the words of the notification and even those more specifically relied upon, are wide enough to include any business whether of the one
kind or other. It cannot be denied that the Bank is a Co-operative Society and is claiming the exemption only as such, and further that it is claiming the exemp- tion in respect of profits from a business carried on by
it. It was for this reason that the attempt to bring the profits within " other sources " covered by s. 12 of the Indian Income-tax Act was rightly abandoned in this Court. If this is the obvious position, it follows·
that the words " the profits of any Co-operative Society" are wide enough to cover profits-from any business, and there is nothing to show that the profits there mentioned are only the profits from business
– with members. It is next argued that a Co.operative Society exists for business with members, and that the Co-operative Societies-Act and t_!ie bye-laws of the Bank reflect this
character of the business· undertakings. This inten- tion underly!ng the Co-operative Societies Act and the bye-laws, it is urged, is the key to the interpretation of the notification, and it must, therefore, be limited to
profits from business with membe.rs only. In support of this argument, reference is made to observations in The Madras Central Urban Bank Ltd. v. Commissioner of Income- tax (' ), The Madras Provincial Co-operative
Bank Ltd. v. Commissioner of Income.tax(') and Com- missioner of Income-tax, Burma v. The Bengalee Urban (1) (t929) I.L.R. 52 Mad. 640 F.B. (2) (1933) I.L.R. 56 Mad. 837 F.B. I960
Hos.hiarpur Central Co-operative Bank. Ltd. v. Commissioner oj · Incotiie-tax, Simla Hidayatullah ]. · z960 Ho.sh1arpur CtHlral Co-optratit•t Bank l.td. v. Conunisstontr of Incomt·tax,
Sintla Hidayat11Jlah J. ll2 [1961] Go-operative Credit Society, Ltd.('), where it wa.spoint- ed out tha.t the notification covered only profits from business with members. The first two ca.sea wero of
interest derived from moneys invested in Government Securities to comply with orders of Government to the Societies to keep 40 per cent of the tota.I liabilities always ready at hand, a.nd it was sa.id that the profits
were not from business with members. In the la.st of the three cases, it was pointed out that the exemption was grounded on the principle that 'a. person cannot make a. loss or profits out of himself', and strictly
speaking, only such profits a.s were made in business with members were exempt. The position since these cases were decided ha.a been ma.teria.Ily altered by the a.ddit.ion of the Explanation. The Explanation now takes us back to the kinds of
income to be found ins. 6 of the Indian Income.tax Act where business profits a.re, in a. category by them- selves, more exhaustively treated ins. 10. There a.re other heads of income of distinct cha.ra.cteristics which
a.re treated separately, a.nd then thore is a residuary head which includes income from "other sources" which for that reason a.re innomina.te. The Expla.na.- tion cannot be so.id to imply a. genera.I approval of the
earlier decisions. Such a. conclusion does not neces- sarily follow, beca.uso if the pa.re.graph of the notifies.. tion wa.s clear enough there was hardly a.ny need for the Explanation. The addition of the Explanation
clears once for a.11 any doubt that might have a.risen a.s to the ambit of the word "profits". After the addi- tion of the Expla.na.tion a.nd even before it, the worrl denoted profits from business a.nd not income which
a.rose, a.pa.rt from business. It must not be overlooked that at the time when the notification wa.s first iSBued a.nd also when it was amended, it was not even contemplated that Co-opera-
tive Societies would be permitted to deal in commodi- ties in short supply with a. view to ensuring their equitable distribution among the consumers. It was, however, a.Iwa.ys open to the appropriate Government
to allow a Society to extend its busiuess operations to (1) (1933) l.L.R. 11 ~an. Ju. trading with persons other than its members subject to conditions and . restrictions, vide s. 31 of the
Co-operative Societies Act. This has, in fact, been done here. Once there is this extension of the business of a Co-operative Society, the general words of the notifica- tion include the profits from such business within the
exemption",a.nd it would require more than a supposed underlying intention to negative the exemption. To Hoshiarpur CentYal co.operative Bank Ltd. v. Commissioner of lncome·lax, Simla
gather the meaning of the notification in the light of Hidayatull•h J. 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. In the result, we allow the appeal with costs here and in the High Court. Appeal allowed. SHRI BALWANTRAI CHIMANLAL TRIVEDI v. M. N. NAGRASHNA AND OTHERS.
(B. P. SINHA, c. J., J. L, KAPUR, P. B. GAJENDRAGADKAB, K. SuBBA RAo and K. N. WANCHOO, JJ.) Supreme Court-Appeal by special leave-Question of jurisdic- tion of inferior court-Court not bound to decide where there is110 failure of justice-Review-Constitution of India, Art. z36. Where at the hearing of an appeal filed by special leave
from a decision of the High Court in a Writ Petition filed there under Art. 226 of the Constitution of India against an order of the Payment of Wages Authority, the Court constdered that
there was some force in the contention relating to the jurisdic- tion of the Authority concerned but did not decide that question on the view that as there had been no failure of justice the Court would not interfere under its powers under Art. 136, and the appellant applied for a review of the judgment:-
r960 August 3.