COMMISSIONER OF INCOME TAX Vs. NACHIMUTHU INDUSTRIAL ASSOCIATION

JUDGEMENT

(1.) THIS is a reference under s. 256(1) of the Income-tax Act, 1961, hereinafter referred to as "the Act", at the instance of the Revenue.

(2.) THE facts found by the Tribunal, as disclosed from the statement of the case drawn up by the Tribunal, can be stated as follows :- THE assessee is a private limited company incorporated on September 5, 1956, for the purpose of promoting various charitable objects. On August 11, 1958, the assessee settled the income from all its properties including the income derived from the business carried on by it in trust for carrying out certain charitable objects set out in the trust deed. THE assessee was a partner in seven partnership concerns holding shares as enumerated in the statement of case. THE assessee retired from the different partnerships prior to December 31, 1970. On the date the assessee retired from the partnership firms, the respective firms did not have adequate cash resources to pay the amount due to the assessee on the settlement of accounts, by way of capital contributed by it and the share of profits due to it. In those circumstances, the amounts due to the assessee were transferred to a current account. THE statement of case shows the particular amounts due from the different firms to the assessee as on the date of its retirement. No interest was paid by the firms on the outstanding amounts due to the assessee.

(3.) THE relevant provisions of the statute may be now set out. Chapter III of the Act deals with incomes which do not form part of the total income. Section 11 provides, among others, that the income derived from property held under trust wholly for charitable or religious purposes shall not be included in the total income of the previous year of the person in receipt of the income, to the extent to which such income is applied to such purposes. Section 12, prior to the amendment by Finance Act, 1972, with effect from 1973, reads as follows :