CIT v Ogale Glass Works

Facts

• Ogale Glass Works Ltd held government securities
• It earned interest income on these securities
• The assessee argued the interest was business income since the securities formed part of its business assets
• The CIT assessed the interest under the separate head specifically for interest on securities

Issues

1. Whether interest on government securities held as business assets is taxable as business income or under the specific head for interest on securities
2. Whether the purpose of holding determines the head of income for interest

Held

• Interest on securities is assessable under the specific statutory head for such interest, regardless of the capacity in which the securities are held
• The character of the income (interest) determines its classification, not the character of the holder (trader vs investor)
• Where a specific head exists for a particular type of income, it takes precedence over the general business income head

Ratio Decidendi

The Income Tax Act prescribes specific heads for specific types of income. When income falls squarely within a specific head (interest on securities), the general residuary or business head does not apply, regardless of the commercial context of holding the asset. The source of income dictates its classification.