Section 11 exemption barred for chit fund income where business was not part of the trust's primary purpose.

Income derived from chit fund business was held outside exemption under section 11 because the activity fell within the statutory bar in section 13(1)(bb) for assessment years after 1 April 1977. The court applied its earlier view that section 11 was unavailable where the business was not carried on in the course of actually carrying out the primary purpose of the trust. Exemption was therefore denied for chit fund income, while the assessee's other income remained eligible for exemption and was not affected by that disqualification.

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Issues: Whether the assessee was entitled to exemption under section 11 of the Income-tax Act, 1961 in respect of income derived from chit fund business, and whether section 13(1)(bb) barred such exemption for the assessment years in question.

Analysis: The reference concerned assessment years after 1 April 1977, for which the earlier decision of the court had already held that exemption under section 11 was unavailable where the business was not carried on in the course of actually carrying out the primary purpose of the trust. The chit fund activity was found to fall within the statutory bar created by section 13(1)(bb), while the assessee's other income was not affected by that disqualification.

Conclusion: The assessee was not entitled to exemption under section 11 in respect of income from chit fund business, but remained entitled to exemption for other income. The question was answered in the affirmative and against the assessee.

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