COMMISSIONER OF INCOME TAX Vs. MUTHOOTTU CHARITABLE TRUST

JUDGEMENT

(1.) THE assessee in these two references, relating to the assessment years 1980-81 and 1981-82 is a trust created under an indenture executed on August 16, 1976. Three brothers, Mr. M. George, M. Mathew and Mathew M. Thomas of Muthootu House, Kozhencherry, are the authors of this trust. THEse three brothers also along with their children and close relatives carry on the business of the firm in the name and style of Muthoottu Mini Chitty Fund. THE business is of conducting chitty and money-lending on a large scale. THEre are different partnership firms also other than the above chitty fund. THE present assessee-trust though came up under the indenture in 1976, became active after the formation of the chitty fund in June, 1977.

(2.) THE nature of the business activity so far as is relevant to the present references postulates a spread over of the activities of the fund carried out by the above firm. THE firm had several series of chitty funds on the basis of agreements entered into between the fund, on the one hand, and the subscribers who are participants in the series of chitty funds on the other.

(3.) THE undisputed facts are that the present assessee-trust was deriving its entire income from the chitty fund. At the time of the original assessment, the income-tax authorities treated the entire income of the trust as exempt under Section 11 of the Income-tax Act, 1961. This was found to be irregular when it was discovered that the entire funds were really in the hands of a chitty fund--a firm--and came to be transferred to the trust only much thereafter on April 25, 1984.