1981 (3) TMI 146

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....e IT Act, 1961 being relief of the poor, medical relief education and any other object of public utility not involving the carrying on of an activity for profit. There is, therefore, no dispute that the assessee would ordinarily be eligible for exemption under Sec. 11 subject to its satisfying the other conditions. The assessee had invested a sum of Rs. 1,82,589 in the firm of M/s P.S.K. Finance & Chit Funds Corporation, which consisted of partners, T.K. Kuppusamy, a divided son and Smt. Malarkodi Rani, daughter-in-law of the author of the trust, besides a minor grand-daughter by name Sasikala admitted to the benefits. There were also other advances of Rs. 67,500 to the self-same firm, besides another advance of Rs.75,000 in M/s P.S.K. Fina....

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.... consider the facts of this year, but merely followed the earlier orders. The AAC however, went in to the facts. Apart from the same, he found that the advances made by the assessee to the relatives or the firms in which such relatives were interested could not really be considered as investments, but were merely loans and advances and that the making of such loans and advances to relatives or concerns in which such relatives are interested do not disqualify the trust for exemption unless such moneys are lent "without either adequate security or adequate interest or both". He found that the assessee had made only advances and had not made any investments. For this finding, he relied upon a circular of the CBDT published in 79 ITR 43 (St), w....

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....t had been introduced by Finance Act, 1970 reads as under: " (vi) For the purposes of the provision in cl. (h) of sub-s. (2), relating to the investment of the trust funds in any concern in which any of the specified persons has a substantial interest, it may be noted that this provision has to be applied only with reference to investments in the capital of the concern as distinct from investments in the debentures of a company or by way of loans to a company or other concern. This is because under cl. (a) of sub-s. (2), a trust will be deemed to have used or applied its income or property for the benefit of the specified persons if any part of such income or property is, or continues to be, lent to any such person for any period during th....