MADRAS CO-OPERATIVE CENTRAL LAND MORTGAGE BANK LTD. vs COMMISSIONER OF INCOME-TAX, MADRAS

The Supreme Court ruled that under Section 14(3) of the Indian Income-tax Act, 1922, a cooperative society not engaged in banking is not liable to tax on profits from business activities. The Court established that in the absence of statutory rules for apportioning income from government securities, a commercial accounting principle should be applied. Consequently, the taxable income from securities for the cooperative society was determined to be Rs. 13,578, as it was proportionate to the capital used for business against total working capital.