Law: Income Tax Act (XI of 1922)

Section: 10

Income-tax Act (XI of 1922)----   ------ S. 10(2)(iii)-Interest-Hindu undivided family-Credit standing in name of karta's wife -Part of amount transferred to trust account after wife's death -Trust deed executed later by karta-Validity of trust-Interest credited to trust account-Whether allowable deduction.   The assessee was a Hindu undivided family which carried on an extensive business. In its account books the sum of Rs. 75,000 stood to the credit of the wife of the karta of the family. She died in 1945. On November 2, 1948, a sum of Rs. 31,000 of the balance standing to her credit was transferred by the karta to a trust account. On April 5, 1951, he executed a trust deed in which he declared that he held the sum of Rs. 31,000 so transferred to the trust account in trust for the carrying on of a Sanskrit patasala in her name in accordance with her desire. During the accounting years relevant to the assessment years 1952-53 and 1953-54 interest was credited to the trust account and the question was whether that interest was an admissible deduction in computing the assessee's profits. The Appellate Tribunal held that the trust was invalid and therefore the interest was not allowable. On a reference   Held, that although the entry in the assessee's books on November 2, 1948, did not bring into existence a valid trust by itself, a valid trust was created by the registered trust deed dated April 5, 1951 ; the debt due from the assessee could lawfully constitute the subject of a trust. The interest credited in the assessee's accounts was, therefore, a permis sible deduction.   Muthappa Chettiar v. Commissioner of Income-tax (1945) 13 I T R 311 (Mad.) distinguished.   Chambers v. Chambers I L R 1944 Mad. 617 ; Mathappa Chettiar v. Commissioner of Income-tax (1945) 13 I T R 311 and Ramanathan Chettiar v. Palaniappa Chettiar I L R 1945 Mad. 500 ref.   STATEMENT OF CASE   By these applications, which are consolidated, under section 66(1), the assessee requires the Appellate Tribunal to refer certain questions of law said to arise out of the Tribunal's orders, I. T. As. Nos. 561 and 562 of 1955-56, dated…