JUDGMENT

SHAH J.-Two questions were referred by the Tribunal to the High Court of Allahabad under section 66(1) of the Indian Income-tax Act, 1922. We are concerned with the first question alone, because the second has been answered in favour of the assessee and no appeal has been filed by the revenue against the decision on that question. The question which was decided against the assessee reads as follows :

"Whether the interest on securities issued by the erstwhile Indian States of Travancore and Cochin is assessable under section 8 of the Act or under section 12 of the Act ? "

There is no dispute that the securities held by the appellant bank were issued by the Indian States of Travancore and Cochin some time before August 15, 1947. The securities were "tax free". Under section 8 of the Income-tax Act, 1922, the tax shall be payable by an assessee under the head "Interest on securities" in respect of the interest receivable by him on any security of the Central Government or of the State Government or on debentures or other securities for money issued by or on behalf of a local authority or a company. The third proviso to that section provides :

" Provided further that the income-t