JUDGMENT

Ahmadi, CJI-Special leave granted in SLP (C) Nos. 5813-14 of 1982.

2. The assessee in all these cases is a Co-operative Society registered under the Madhya Pradesh Co-operative Societies (Amalgamation) Act, 1957 hereinafter called the Act . While framing assessment for the relevant assessment years in question, the Income Tax Officer, included in the taxable income of the assessee interest earned on securities earmarked against reserves and interest earned on Provident Fund deposits. The assessee contended that it was entitled to the benefit of Section 81 of the Income Tax Act as in force at all material times. The Income Tax Officer rejected this claim of exemption from tax put forward by the assessee. Since the assessee s contention did not find favour at the higher levels also, including the reference to the High Court, the assessee has approached this Court.

3. Section 81 of the Income-Tax Act on which the assessee s case is based read thus at all material times :

"Income of co-operative societies-Income Tax shall not be payable by a co-operative society-

(i) in respect of the profits and gains of business carried on by it, if it is-

(a)