THE MADHYA PRADESH CO-OPERATIVEBANK LIMITED, JABALPUR vs ADDITIONAL COMMISSIONER OF INCOMETAX MADHYA PRADESH, BHOPAL

The Supreme Court addressed the applicability of Section 81 of the Income Tax Act, which exempts certain incomes of co-operative societies from tax. The Court held that only income derived from banking business is exempt, and not all income of a co-operative society. It ruled that interest earned on government securities earmarked for reserves does not qualify as income from banking business under Section 81, thus affirming the Income Tax Officer's decision to include this interest in taxable income. The appeal was dismissed, upholding the lower court's ruling.