SEN J. - These applications under article 226 of the Constitution by the petitioner, Assam Co-operative Apex Bank Ltd., are directed against an order dated April 19, 1969, passed by the Commissioner of Income-tax, Assam, Tripura, Manipur and Nagaland, holding that the Government securities in question were not trading assets of the bank and that the income arising therefrom as interest was not business income and accordingly not exempt under section 81(i) of the Income-tax Act.
The Income-tax Officer, A-ward, Shillong, has passed assessment order and had also issued demand notices for assessment years 1954-55 and 1957-58 to 1966-67 on the petitioner, against which the petitioner filed revision applications before the Commissioner of Income-tax, whereupon the Commissioner, after hearing the parties, passed the aforesaid impugned order.
Mr. G. K. Talukdar, the learned standing counsel for the department, made a preliminary submission that these applications did not lie, in view of the fact that an alternative remedy was open to the petitioner, which the petitioner did not exhaust. The learned standing counsel further submitted that the Income-tax Act is a self-contained Act and that the remedies available thereunder should first be availed of before the petitioner could seek relief under article 226 of the Constitution of India. The learned standing counsel invited our attention to Champalal Binani v. Commissioner of Income-tax : 76ITR692(SC) , where their Lordships have held (page 695) :
"........ the Income-tax Act provides a complete and self-contained machinery for obtaining relief against improper action taken by the departmental authorities, and normally the party feeling himself aggrieved by such action cannot be permitted to refuse to have recourse to that machinery and to approach the High Court directly against the action. ...... Where the party feeling aggrieved by an order of an authority under the Income-tax Act has an adequate alternative remedy which he may resort to against the improper action of the authority and he does not avail himself of that remedy the High Court will require a strong case to be made out for entertaining a petition for a writ. Where the aggrieved party has an alternative remedy the High Court would be slow to entertain a petition challenging an order of a taxing authority which is, ex facie, with jurisdiction."
No doubt, the order of the Commissioner is within his jurisdiction and competence, but in view of the fact that no appeal, revision or review lies under the Income-tax Act against that order, this application under article 226 of the Constitution cannot be dismissed on the ground that the petitioner did not exhaust the statutory remedies which would have been open to him.
The petitioners case is that it is co-operative bank registered under the Assam Co-operative Societies Act, 1949, and that its business income would be exempt from payment of income-tax under section 81 of the Income-tax Act, 1961 (hereinafter called "the Act"), which (as it then stood) reads as under :
"81. Income-tax shall not be payable by co-operative society - (i) in respect of the profits and gains of business carried on by it, if it is -
(a) a society engaged in carrying on business of banking or providing credit facilities to its members; or
(b) a society engaged in a cottage industry; or
(c) a society engaged in the marketing of the agricultural produce of its members; or
(d) a society engaged in the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members; or
(e) a society engaged in the processing without the aid of power of the agricultural produce of its members; or
(f) a primary society engaged in supplying milk raised by its members of the federal milk co-operative society :
Provided that, in the case of a co-operative society which is also engaged in activities other than those mentioned in this clause, nothing contained herein shall apply to that part of its profits and gains as it attributable to such activities and as exceeds fifteen thousand rupees;
(ii) in respect of so much of the profits and gains of business carried on by it as does not exceed fifteen thousand rupees, if it is a co-operative society other than a co-operative society referred to in clause (i);
(iii) in respect of any interest and dividends derived from its investments with any other co-operative society;
(iv) in respect of any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities;
(v) in respect of any interest on securities chargeable under section 18 or any income from property chargeable under section 22, where the total income of the co-operative society does not exceed twenty thousand rupees and the society is not housing society or an urban consumers society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power :
Provided that nothing contained in this section shall apply to a co-operative society carrying on insurance business in respect of the profit and gains of that business computed in accordance with section 44.
Explanation. - For the purposes of this section, "an urban consumers co-operative society" means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment."
The petitioners case, in brief, is that the securities in question are trading assets and part of its circulating capital and accordingly any interest received on deposits of such securities would be trading income and as such exempt from taxation under the aforesaid provision.
The Commissioner in his order under section 264 of the Act, however, held that the petitioner was not entitled to any exemption under section 81 of the Act on the ground that the petitioner was not a dealer in securities. The Commissioner held : "to claim that securities are part of trading assets the company must show that it is dealing in securities as an integral part of its business operations and not merely as an investment for ideal funds." The Commissioner also held : "The petitioner in this case is a co-operative institution run under the aegis of the State Government and, being sponsored by the State, has obviously to work under the restriction mentioned above and, therefore, cannot be said to be an institution carrying on business in securities." The Commissioner came to the conclusion that since the securities held by the assessee could not be taken to be a part of stock-in-trade, the income from interest which accrued to the petitioner on such Government and other securities would not be deductible, not being part of the profits of its banking business.
The test that was applied by the Commissioner was that unless the petitioner was a dealer in securities, it would get the benefit of section 81 of the Act. The Commissioner also had held that in no circumstances could income from investment on securities be regarded as income from business for any purposes of the Act.
We have to determine how far the proposition enunciated by the Commissioner in his aforesaid order amounts to an error of law apparent on the face of the record.
In rejecting the petitioners claim for exemption under section 81 of the Act, the Commissioner relied on the fact, as found by him, that the petitioner was not a dealer in securities and as such any investment in securities could not have been a trading investment, so that any income received as interest thereon would not qualify for exemption under the aforesaid provision of the Act.
Our attention has been drawn by Mr. K. Roy, the learned counsel appearing for the petitioner, to Commissioner of Income-tax v. Bombay State Co-operative Bank Ltd. : 70ITR86(SC) , in support of his submission that the securities are part of the petitioners circulating capital. In that case, their Lordships of the Supreme Court held :
"Interest received from Government securities held by a co-operative society as its stock-in-trade qualifies for exemption under Notification No. F.D. (C.R.) R. Dis. No. 291-I.T./25 dated August 25, 1925, issued undeer section 60 of the Indian Income-tax Act, 1922." "Their Lordships further held (page 88) :
In Bihar State Co-operative Banks case : 39ITR114(SC) , the appellant-society carried on business of general banking and received interest on short-term deposits made by it with the Imperial Bank of India. The claim of the appellant-society for exemption from income-tax under the notification was rejected by the Tribunal. The High Court of Patna on a reference held that only the income derived from the business of the co-operative society fell within the exemption and that the exemption was not available in regard to income derived from investment of fluid assets with third parties. This court held that since the appellant-society was a bank and one of its objects was to carry on general business of banking its normal business was to deal in money and credit and was not restricted to receiving deposits and lending money to its members or other societies, and, therefore, the money laid out in the form of deposit did not cease to be part of the circulating capital and interest from the deposits arose from the business of the bank and was exempt from income-tax under that notification."
Our attention has also been invited to Bihar State Co-operative Bank Ltd. v. Commissioner of Income-tax : 39ITR114(SC) . Therein their Lordships of the Supreme Court held :
"As the appellant was a bank and one of its objects was to carry on the general business of banking, its normal business was to deal in money and credit and did not consist only of receiving deposits and lending money to its members or other societies. It was a normal mode of carrying on banking business to invest moneys in such a manner that they are readily available. The moneys laid out in the form of deposits did not cease to be part of the appellants circulating capital. The interest from the deposits arose from the business of the bank and was exempt from income-tax under the notifications, and nothing turned on the manner in which the appellant chose to show this income in its return."
In Punjab Co-operative Bank Ltd. v. Commissioner of Income-tax  8 ITR 635645, their Lordships of the Privy Council held :
"In the ordinary case of a bank the business consists in its essence of dealing with money and credit. The banker has always to keep enough cash or easily realisable securities to meet any probable demand by depositors, and if some of the securities are realised in order to meet withdrawals by depositors, this is clearly a normal step in carrying on the banking business, in other words, that it is an act done in what is truly the carrying on the banking business.
From the decisions cited above, it would clearly emerge that it is not necessary that the petitioner need have been primarily or exclusively a dealer in securities in order to qualify for the exemption under section 81 of the Act. All that it is necessary for the petitioner to show is that the interest was received from Government securities, which had been invested by the co-operative bank as its trading assets, in other words, that the securities represented the funds of the petitioner, which were part of its circulating capital. Of course, all investments may not necessarily be part of the circulating capital of a bank. A bank may conceivably have certain securities which are its circulating capital and some which are not. For example, where the funds of a bank are lying idle and are not being utilised by it for its banking purposes, as was the case in Commissioner of Income-tax v. Canara Bank : 63ITR328(SC) , such funds will not be part of its trading assets. In other words, any investment by a banking concern could not necessarily represent its trading assets. There may well be cases where certain funds are idle or not utilised by the bank, in which case such funds will not be trading assets. However, the proposition enunciated and relied on by the Commissioner that unless the petitioner was a dealer in securities and had been regularly buying and selling securities, it would not be entitled to the exemption under section 81, was manifestly wrong, in view of the decisions cited above.
In the instant case, the petitioner had invested part of its funds under bye-law 4(h) of its rules. This reads as under :
"To buy and sell, the legitimate investment of the surplus funds, securities of the Government of India or the Government of Assam,or other securities specified in clauses (a), (b), (c) and (d) of section 20 of the Indian Trusts Act and to act as agents of co-operative societies for the purchase and sale of shares and securities."
The petitioners contention before the Commissioner as well as before this court has been that the securities are the trading assets of the bank and that they held that the said securities as part of its banking business, as provided and permitted under the aforesaid bye-law 4(h).
If the Commissioner had found that the contention of the petitioner was not tenable on the facts of the case, that it to say, if the Commissioner had found that the securities were not factually part of the trading assets of the petitioner or that the petitioner as a banking concern was precluded from making investment in such securities under the rules or laws governing that banking concern, the interest on such securities would not have been part of its trading profits. However, the Commissioner came to a clear finding that the interest on securities could be held to have been related to the societys banking business. Nevertheless, it found that since the petitioner was not dealing in securities and since the profit and loss was not disclosed in a statement as such dealer in securities, the petitioner was not entitled to the benefit under the section of the Act.
In our opinion, the Commissioners finding that only a dealer in securities is entitled to the benefit under section 81 and that a co-operative society, which has invested its available funds in securities and has received some interest thereon, is not entitled to any exemption in regard to such interest under the section, is clearly wrong. We are also of the opinion that the Commissioners finding "in no circumstances can the investment and securities be regarded as income from business" is also clearly wrong in view of the decision cited above.
The question as to what would be the head of income under which the interest on securities in the present case is to be classified under section 14 of the Act is also irrelevant, in arriving at a decision as to whether the income arises from the trading assets of a bank and as such exempt from tax under section 81 of the Act.
The next point for decision is whether, on the facts stated above, a writ in the nature of certiorari can issue. The circumstances under which a writ in the nature of certiorari can issue had been clearly laid down by their Lordships in Syed Yakoob v. K. S. Radhakrishnan : 5SCR64 In that judgment their Lordships held :
"It is, of course, not easy to define or adequately describe what an error of law apparent on the face of the record means. What can be corrected by a writ has to be an error of law, but it must be such an error of law as can be regarded as one which is apparent on the face of the record. Where it is manifest or clear that the conclusion of law recorded by an inferior court or tribunal is based on an obvious misinterpretation of the relevant statutory provision, or sometimes in ignorance of it, or may be, even in disregard of it, or is expressly founded on reasons which are wrong in law, the said conclusion can be corrected by a writ of certiorari. In all these case, the impugned conclusion should be so plainly inconsistent with the relevant statutory provision that no difficulty is experienced by the High Court in holding that the said error of law is apparent on the face of the record. It may also be that, in some cases, the impugned error of law may not be obvious or patent on the face of the record as such and the court may need an argument to discover the said error; but there can be no doubt that what can be corrected by a writ of certiorari is an error of law and the said error must, on the whole, be of such a character as would satisfy the test that it is an error of law apparent on the fact of the record."
It is thus clear from the above decision of the Supreme Court that if an inferior tribunal comes to a finding in disregard of the relevant statutory provision or if it decision is manifestly founded on reasons which are wrong in law, the said conclusion can be corrected by a writ of certiorari. In the instant case, as we have stated above, the finding of the Commissioner was based on the reasoning that unless the petitioner was a dealer in securities, he would not be entitled to the benefit of section 81 of the Act. Surely, therefore, the Commissioners decision was based on reasons which are wrong in law and is, therefore, amenable to the writ jurisdiction of this court.
We may refer here to a decision of the House of Lords in Edwards (H. M. Inspector of Taxes) v. Bairstow & Harrison  36 TC 207 ITR 579. Although, this is a decision on a case stated, the principles determining what is an error of law can be found in the aforesaid judgment. Lord Radcliffe in his speech stated : [See also  28 ITR 579] :
"I do not think that inferences drawn from other facts are incapable of being themselves findings of fact, although there is value in the distinction between primary facts and inferences drawn from them. When the case comes before the court, it is its duty to examine the determination having regard to its knowledge of the relevant law. If the case contains anything ex facie which is bad in law and which bears upon the determination, it is, obviously, erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have come to the determination under appeal. In those circumstances, too, the court must intervene."
Again, Viscount Simonds in distinguishing a question of law from a question of fact stated in his speech thus-See  28 ITR 579 :
"But it is a question of law, not of fact, what are those characteristics or, in other words, what the statutory language means. It follows that the inference can only be regarded as an inference of fact if it is assumed that the Tribunal which makes it is rightly directed in law what the characteristics are and that, I think, is the assumption that is made. It is a question of law what is murder : a jury finding as a fact that murder has been committed has been directed on the law and acts under that direction. The Commissioners making an inference of fact that a transaction is or is not an adventure in the nature of trade are assumed to be similarly directed, and their finding thus becomes an inference of fact."
"In Halsburys Laws of England, third edition, volume 20, at page 696, the distinction between questions of law and questions of fact has been gone into. It has been stated therein (at page 697) :
"The question whether or not there was any evidence for the Commissioners to support their determination of a fact is a question of law, and, where the only true and reasonable conclusion from the evidence contradicts the determination of the commissioners, the court must intervene to review their decision. Moreover where it appears to an appellate court that no person, if properly instructed in the law and acting judicially, could have reached the determination in question, the court may proceed on the assumption that a misconception of law has been responsible for the determination, although the case stated shows on the face of its no misconception of law."
It may here be noted that the case of Edwards (H. M. Inspector of Taxes) v. Bairstow & Harrison  36 TC 207 was cited by Halsbury. Following the ratio decidendi in the judgments cited supra, we are of the opinion that the Commissioners finding have been arrived at on grounds which are wrong in law would be amenable to a writ in the nature of certiorari. We need not refer at length to the other decisions of the Supreme Court cited by the counsel for both the sides on the question, but we may only note citations : (1) Bachan Singh v. Gauri Shankar Agarwal : AIR1971SC1531 ; (2) Champalal Binani v. Commissioner of Income-tax : 76ITR692(SC) and (3) T. C. Basappa v. T. Nagappa : 1SCR250 . In these decisions, their Lordships have enunciated the scope of the writ of certiorari and the principles cited above have been approved.
The learned standing counsel has also drawn our attention to Visheshwara Singh v. Commissioner of Income-tax : 41ITR685(SC) in support of his submission that what amounts to business and what can be held to have been done or invested in carrying on such business, must be determined on consideration of various relevant factors; in other words, whether the investments in question were trading assets and the income therefrom was income from the business of a banking concern, could have been determined only after consideration of the evidence as regards the magnitude of the securities, the rate of conversion thereof, and the proportion bore to the capital assets. The learned standing counsel submitted that all these factors including bye-laws 4(h) and 4(d) were taken into consideration by the Commissioner before he came to his finding that the investments did not represent the petitioners trading assets. We, however, cannot subscribe to his submission in view of the fact that the Commissioner did come to a clear finding that the interest on securities were relatable to the societys banking business. We also find that the Commissioners entire approach to the matter was on the basis whether the petitioner was a dealer in securities or not. The Commissioner never approached the problem in the way he should have, that is to say, whether the investments were really part of the petitioners trading assets or not. On the contrary, we find that the Commissioner accepted the contention of the petitioner that the securities represented his trading assets, but nevertheless he found that since the petitioner was not a dealer in securities, it was not entitled to the exemption under section 81 of the Act.
The learned standing counsel for the department has submitted that although the test applied by the Commissioner, namely, that the petitioner must be a dealer in Government securities in order to come within the scope of section 81 of the Act, may be wrong, the Commissioner was not incorrect in coming to the conclusion he did, inasmuch as there was nothing before the Commissioner to indicate or to support the petitioners contention that the petitioners investments in the Government securities were in their entirety trading assets. Accordingly, the learned standing counsel submits that even if the aforesaid test applied by the Commissioner was wrong, the matter should go back on remand to the Commissioner in order to enable him to come to a proper finding as to what proportion, if any of the securities represented the petitioners trading assets and, as such, was part of its circulating capital. In support of this submission, the learned standing counsel has invited our attention to Madras Co-operative Central Land Mortgage Bank Ltd. v. Commissioner of Income-tax : 67ITR89(SC) , where their Lordships held that the proportion of income from securities which is exempt for taxation under section 14(3) of the Indian Income-tax Act, 1922, will be that proportion which the capital of the society used for the purpose of the business bears to the total working capital of the society. The learned standing counsel submits that accordingly the matter should go back on remand to the Commissioner for determination as to what part of the securities represented the trading assets and what part were non-trading assets, because all investments of a bank in securities are not necessarily its trading assets or part of its circulating capital. The aforesaid submission was, however, made for the first time during the hearing of this application by this court. Before the Commissioner the contention of the petitioner was that the securities in question were wholly trading assets of the bank and that the bank held and disposed of the same as part of its business in accordance with the bye-law 4(h). There was no contrary allegation before the Commissioner that part of such securities only was trading assets and that another part was not. In point of fact, the Commissioner also observed that "the point for consideration is whether the income from interest on securities derived by the (petitioner) co-operative bank can be treated as profits and gains of business carried on by the assessee". The Commissioner also came to a finding that the interest on securities could be held to be related to the societys banking business. He also held that a banking institution is required under the provisions of law to keep a certain percentage of its surplus funds in the shape of easily realisable securities to ensure availability of liquid resources for meeting immediate obligations. But he rejected the claim of the petitioner for exemption under section 81 of the Act on the sole ground that the petitioner was not a dealer in securities. From the petitioners application (para. 4) also, it is quite clear that his case is that the petitioner in the course of its banking business, purchased Government securities out of its circulating capital, as means of safe deposit to be withdrawn, when needed, for meeting its commitments to its constituents and depositors with the approval of the board of directors. It also appears from paragraph 15 of the application that "the petitioner has, from time to time, invested its circulating funds in Government or such other securities in accordance with its aims and objects with liberty to withdraw and encash the same for legitimate disbursement or use thereof to meet depositors demands. The amount laid out in the purchase of Government securities and other securities cannot ipso facto be deemed to be surplus within the meaning of the eye of law in idle moneys so as to take it out of the banking business."
In the affidavit-in-opposition filed on behalf of the respondents, the position taken, however, was that "the investments of surplus and idle funds in securities by the petitioner were merely by way of an investment of idle funds and not by way of dealing in securities as an integral part of the business of the petitioner. "The respondents in their affidavit-in-opposition also averred that since the securities purchased by the petitioner-society were held for a long number of years and there was no frequency of purchase and sale of the said securities, the said securities were held as investment and not by way of stock-in-trade of the petitioner working as a bank and, as such, the interest arising therefrom did not form part of its business profits.
It will be clear from the discussion above and from the order of the Commissioner that he came to his finding on a complete misconception of the relevant provisions of law, that is, section 81(i)(a) of the Act, which provided that income-tax shall not be payable by a co-operative society in respect of profits and gains of business carried on by it, if it is a society engaged in carrying on the business of banking or providing credit facilities to its members. In our opinion, this provision seems to have been completely overlooked by the Commissioner, inasmuch as he held that unless the petitioner was a dealer in securities, the interest arising therefrom would not be entitled to an exemption. The Commissioner did not consider, nor was it canvassed before him, whether any portion of such securities was trading assets and the rest was not.
If any inferior tribunal, in speaking order, has given reasons for its decisions and if it be found that those reasons are wrong in law or that the reasons specified disclose a clearly erroneous legal approach, such decision is liable to be quashed in exercise of this courts powers under article 226 of the Constitution. In the instant case, the Commissioner has set out his findings and has given his reasons therefor and it is quite clear to us that such decision was based on an erroneous legal approach, which is manifest from the order itself. The corrective measure that can appropriately be taken by a High Court when issuing a writ of certiorari has been clearly laid down in Prem Sagar v. Standard Vacuum Oil Company : (1964)ILLJ47SC . Their Lordships held therein (at page 118) :
"Incidentally, we ought to point out that even if the Division Bench was right in holding that the impugned order be corrected by the issue of a writ of certiorari, it would have been better if it had not made its own findings on the evidence and passed its own order in that behalf. In writ proceedings if an error of law apparent on the face of the record is disclosed and a writ is issued, the usual course to adopt is to correct the error and send the case back to the special Tribunal for its decision in accordance with law. It would, we think, be inappropriate for the High Court exercising its writ jurisdiction to consider the evidence for itself and reach its own conclusion in matters which have been left by the legislature to the decisions of specially constituted Tribunal." The jurisdiction of this court in exercising its powers under article 226 of the Constitution thus extends to the quashing of an error of law on the face of the record; it is not an appellate jurisdiction in that this court cannot make its own fining and pass an order. This court cannot vary the inferior Tribunals order nor can it substitute its own order. We can only quash the order to extent it is erroneous in law and, if necessary, indicate to the Tribunal the correct legal principles by which it must guide itself. In the instant case, however, it is not necessary for us to remand this matter to the Commissioner, because there is nothing to reconsider, determine and substitute, in the light of the law set forth above. If any further order is required to be passed, as it may well be, it would presumably be on the basis of facts and not of law. The error involved in the impugned order was that the Commissioner held that the petitioner not being a dealer in securities, his income therefrom could not be exempted under section 81(i)(a) of the Act; and we have corrected that error by quashing the order. We, therefore, rest with setting aside the order of the Commissioner dated April 19,1969, holding that the income from securities in question does not represent the business income of the petitioner, on the ground that the petitioner was not a dealer in securities. It would be clearly beyond our jurisdiction in this application to go any further or to pass any other order, directing grant of exemption from tax under section 81(1)(a) of the Act. In the result, the demand notice issued by the Income-tax Officer, A-Ward, Shillong, on the petitioner in respect of each of the eleven assessment years concerned, which is impugned in these petitions, is set aside, as prayed for by the learned counsel for the petitioner, who, it may be stated, does not seek any other relief.
The applications are allowed and the rules are made absolute. There will no order as to costs.
BAHARUL ISLAM J. - I agree.