THE BIHAR STATE CO-OPERATIVEBANK LTD. vs THE COMMISSIONER OF INCOME-TAX

The Supreme Court ruled that interest received by a Co-operative Bank on deposits with other banks is exempt from taxation under Section 10 and Section 12 of the Indian Income-tax Act, 1922, provided it is derived from transactions aimed at carrying on its banking business. The Court held that the interest in question was not income from 'other sources' as defined under Section 12, but rather profit attributable to the bank's business activities, thus falling within the exemption provided by the Central Government's Notification under Section 60 of the Act. The judgment of the Patna High Court was overturned in favor of the appellant bank.