HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
Bihar State Co-operative Bank Ltd. v. Commissioner of Income-tax
Civil Appeals Nos. 228–230 of 1958
[1960] 3 SCR 58 ·
Indian Income-tax Act, 1922: sections 10, 12 and 60 · CBR Notifications No. 35 of 20 October 1934 and No. 33 of 18 August 1945
Sources & disclosures includedDownload original judgment / order
3-judge bench · J. L. Kapur · A. K. Sarkar · M. Hidayatullah
Assessment years: 1946-47, 1947-48, 1948-49
01 · Facts of the case
Interest on deposits with Imperial Bank was reassessed as other-source income, defeating the bank’s claim under the historical cooperative-society exemption notifications. The bank argued these deposits formed circulating capital available for its banking business.
Source: Primary report: SCR 59–63
02 · Discussion by the Hon’ble Court
A bank deals in money and credit, including placing funds with other banks to earn interest while meeting liquidity needs. These deposits matured at short intervals and were not shown to be surplus investments outside the business. Section 12 was residual and did not apply where business income classification governed.
Source: Primary report: SCR 63–68
03 · Judicial decision
Interest from these deposits arose from the bank’s business and fell within the notification exemption. The High Court’s contrary judgment was set aside.
Source: Primary report: SCR 67–68
04 · Outcome / in whose favour
The bank succeeded and was awarded costs in the Supreme Court and below.
Source: Primary report: SCR 68
05 · AKHB REVIEW POINT
Establish how deposits function in the banking business and apply the exact exemption provision. This is not a ruling that every cooperative society’s bank interest qualifies for exemption under current legislation.
Source: Primary report: SCR 66–68
Source & verification
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Statutory scope
Historical legislation expressly identified in this note. This is not a decision under the Income-tax Act, 1961 or the Income-tax Act, 2025. Verify enacted wording, commencement, transition and subsequent judicial treatment independently before modern reliance.
Later treatment
Source checked 2026-10-23. Subsequent treatment and present-law applicability have not been comprehensively checked.
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General legal and tax research only; not legal or tax advice. Verify the complete judgment, applicable statutory version and subsequent treatment before reliance. AKHB REVIEW POINT is editorial analysis, not the Court’s holding.