9911796707
TMI Blog1974 (4) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... nd business did not fall within the scope of section 80P(2)(a)(i) of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), and subjected to the said income to tax rejecting the assessee's claim for deduction under the aforesaid provision. The grounds which weighed with the Income-tax Officer for disallowing the assessee's claim for deduction under section 80P(2)(a)(i) were that the business of conducting the chit fund was not one intended for providing credit facilities but was only in the nature of a saving scheme and that there was no restriction that only members of the society could become subscribers in the chit fund. The assessee preferred an appeal to the Appellate Assistant Commissioner of Income-tax, Ernakulam, conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly discernible in such chit fund schemes and that a chit fund cannot be regarded as a mere saving scheme. Referring to the observation contained in the order of the Appellate Assistant Commissioner that the exemption provided for under section 80P(2)(a)(i) would be attracted only in cases where an assessee has been engaged " in the activity of advancing loans to needy persons just as a bank does ", the Tribunal held that the words used in the said section do not warrant such a restricted interpretation. In this view the Tribunal allowed the appeal and held that the assessee is entitled to deduction under section 10P(2)(a)(i) of the Act and directed the Income-tax Officer to modify the assessment in the light of the said finding. On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he chitty. In the light of the said clause, the Tribunal rightly held that it was not possible to sustain the view expressed by the Income-tax Officer and by the Appellate Assistant Commissioner that the chit fund scheme was not being conducted by the assessee exclusively for the benefit of its members. What remains to be determined is only whether in conducting the chit fund schemes the assessee could be said to be providing credit facilities to its members. The nature and incidents of a kuri or chitty transaction has been described in detail in an early Full Bench decision of the Travancore High Court in Bhagavathi Ammal Lakshmi Ammal v. M. Vencatasubba Iyen in the following terms : " For all practical purpose, a chitty may be described ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan from a common fund, only the order of taking the loan is settled by lots and to that extent the getting of interest alone as distinguished from the principal is made to depend on chance. Further the benefit of the loan is given to all alike." The same view has been taken by the Madras High Court in Kamakshi Achari v. Appavu Pillai and Vasudevan Nambudri v. Mammod. The dominant motive which prompts most people to join chit fund schemes is to avail themselves of the facility of bidding the kuris when they are in urgent need of finance so that they may receive the chit amount in lump as a loan with the facility of repaying it in monthly instalments. A chit fund does, no doubt, incidentally partake of the nature of a saving scheme also. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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