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-tax payable on the
interest receivable on any security of a State Government issued income-tax free
shall be payable by the State Government. "
The appellant-bank contended that the securities of the
Indian State of Travancore and Cochin were State Government securities and
relied upon the definition of State Government in section 3(60) of the General
Clauses Act. The High Court rejected the contention holding that the securities
were " Government securities " within the meaning of section 3(24) of
the General Clauses Act and, on the express terms of that clause, Government
securities did not include securities of the Government of any Part B State
where reference was made in any Act or Regulation before the commencement of the
Constitution to such securities. But section 8 does not use the expression
" Government securities ". It uses the expression "securities of
the State Government" and there is no reason to substitute in a taxing
statute an expression which the legislature has used by another expression which
it has not used. The question is covered by a judgment of this court in
Commissioner of Income-tax v. H. E. H. Mir Osman Ali Bahadur, where this court
held, in dealing with the claim of an assessee to exemption from liability to
pay tax in respect of the Hyderabad State Securities issued before the
Constitution was enacted, that the assessee was entitled under section 8, third
proviso, to exemption from tax on interest on those securities.
The appeal is, therefore, allowed and the answer recorded
by the High Court on the first question discharged. The answer to the first
question will be that the securities issued by the Indian State of Travancore
and Cochin were assessable under section 8 of the Income-tax Act, 1922. The
Commissioner will pay the costs of the appellant-bank in this court and in the
High Court
