Dasa Balinjika Seva Sangam vs Commissioner of Income Tax (No. 2)

N.V. Balasubramanian, J.—At the instance of the assessee, the Income Tax Appellate Tribunal has referred the following common question

of law relating to the assessment years 1979-80 and 1980-81 for our opinion u/s 256(1) of the Income Tax Act, 1961.

Whether the Income Tax Appellate Tribunal is correct in law in concluding that the assessee is not entitled to exemption u/s 11 of the Income Tax

Act, on the ground that the assessee is carrying on business in chit funds, ignoring the fact that the business is carried on in the course of advancing

the primary purpose of the trust ?

The assessment involved is as we have seen for the years 1978-79 and 1980-81.

The assessee claimed exemption relating to his income for the assessment of two years which was rejected by the Income Tax Officer for the

reasons stated by him in the earlier assessment year 1977-78. The view of the Income Tax Officer as well as the Appellate Assistant

Commissioner was confirmed by the Income Tax Appellate Tribunal by following earlier orders of the Appellate Tribunal for the earlier assessment

years 1974-75, 1975-76 and 1979-80. The earlier order of the Appellate Tribunal for the assessment years 1974-75, 1975-76 and 1979-80 is

the subject-matter of the tax references before this court in T. C. Nos. 1357 to 1359 of 1985-- Dasa Balinjika Seva Sangam Vs. Commissioner

of Income Tax (No. 1), , and we have in the judgment rendered by the said tax case on April 28, 1998, held that the assessee would be entitled to

exemption u/s 11 of the Act for the period prior to April 1, 1977, and for the subsequent period from April 1, 1977, the assessee is not entitled to

exemption u/s 11 of the Act in view of the express statutory bar created by Section 13(1)(bb) of the Act as the business carried on by the

assessee was not in the course of actual carrying out the primary purpose of the trust. The assessee is, therefore, in-eligible to get exemption in

respect of the income derived from the chit business. The assessment years involved in the present tax cases are 1978-79 and 1980-81 and the

claim for exemption u/s 11 of the Act is barred by the provisions of Section 13(1)(bb) of the Act. Following the judgment of the Tax Cases Nos.

1357 to 1359 of the 1985-- Dasa Balinjika Seva Sangam Vs. Commissioner of Income Tax (No. 1), of this court, dated April 28, 1998, we hold

that the Tribunal was right in its view that the assessee is not eligible for exemption u/s 11 of the Act in respect of the income from the chit business,

but would be entitled to get exemption in respect of the other income. Accordingly, we answer the question in the affirmative and against the

assessee. No costs.