COMMISSIONER OF INCOME-TAX Vs. RATTAN TRUST

JUDGEMENT

(1.) THIS judgment will dispose of references Nos. 38 to 40 of 1977, 18 of 1978 and 13 and 14 of 1978. References Nos. 38 to 40 of 1977 pertain to the assessment years 1971-72, 1972-73 and 1973-74; whereas Reference No. 18 of 1978 pertains to the assessment year 1974-75, under the Income-tax Act, 1961 (hereinafter referred to as " the Act" ).

(2.) REFERENCES Nos. 13 and 14 of 1978 pertain to the assessment years 1973-74 and 1974-75, under the Wealth-tax Act, 1957. The assessee in all the cases is M/s. Rattan Trust, Amritsar.

(3.) THE brief facts giving rise to the abovementioned references are that the assessee trust "was created in 1942. The dispute relates to the interest income received in each assessment year by the assessee from M/s. Gokal Chand Rattan Chand Woollen Mills Private Ltd. Exemption in respect of this income was claimed by the assessee under Section 11 of the Act. The ITO did not agree with the contention of the assessee that the interest income is to be exempted under Section 11 of the Act and consequently the claim of the assessee was rejected by the ITO. The ITO found that the trust has violated the provisions of Section 13 of the Act inasmuch as the trust funds have been invested in the interested concerns of the trustees, i. e. , M. S. Gokal Chand Rattan Chand Woollen Mills Private Ltd. in shares and deposits. It was found that the assessee violated Clauses (a) and (h) of Sub-section (2) of Section 13 of the Act. The assessee claimed that its case was covered by the first proviso to Sub-section (1) of Section 13 of the Act and, therefore, there is no violation of Section (a) and (h) of Sub-section (2) of Section 13 of the Act. It was claimed that the investments in question were made in compliance which the mandate provided in the trust deed.