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PETITIONER: AHMED G.H. ARIFF & ORS.

       Vs.

RESPONDENT: COMMISSIONER OF WEALTH TAX, CALCUTTA

DATE OF JUDGMENT: 20/08/1969

BENCH: GROVER, A.N. BENCH: GROVER, A.N. SHAH, J.C. (CJ) RAMASWAMI, V.

CITATION:  1971 AIR 1691            1970 SCR  (2)  19  CITATOR INFO :  C          1991 SC2023  (5)

ACT: Wealth  Tax Act (27 of 1957), ss. 2(e), (m) and   7(1)-Right to   receive   share  from   wakf-alal-aulad-Whether   asset assessable  to wealth tax-"If sold in open  market"  meaning of.

HEADNOTE: A  hanafi  Muslim created a  wakf-alal-aulad  and  appointed himself  as  the sole Mutwalli and provided that  after  his death  his widow and sons would act as  Mutawallis  jointly. The wakf was for the benefit of the settler’s wife, children and  their  descendants,  and they were each to  be  paid  a specified  share of the net monthly income of the  property. The  ultimate benefit in the case of complete  intestacy  of the  descendants  of  the  settler  was  reserved  for  poor musalmans of sunni community deserving help  On the question whether the right of the assessee who were the beneficiaries under the deed of wakf, to receive a specified  share of the net income from the estate, was an asset assessable to weath tax, this Court, HELD:  (i)  The right in question was assessable  to  wealth tax.     (i) "Property" is a term of widest import and subject to any  limitation which the context may require, it  signifies every  possible interest which a person can clearly hold  or enjoy. [25 C--D]     The  definition of "assets" in s. 2(e) and that of  "net wealth"   in  s. 2(m) of the Wealth Act  were  comprehensive provisions and all assets were included in the net wealth by the  very  definition.   Therefore, when s.  3  imposed  the charge  of  wealth  tax on the  net  wealth  it  necessarily included in it every description of property of the assessee movable  and immovable, barring the exceptions stated in  s. 2(e) and other provisions of the Act.  There is no reason or justification  to give any restricted: meaning to  the  word "assets" as defined by s. 2(e) of the Act when the  language employed  shows that it was intended to include property  of every description. [25 H; 26 A--B]     On a proper construction of the relevant clauses in  the

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wakf  deed,  it must be held that the aliquot share  of  the income  provided for the beneficiaries was not meant  merely for   their  maintenance  and  support.  But  even  on   the assumption  that  it  was so intended  or  to  preserve  the validity of the deeds it should be so construed the right to the share of the income would certainly be asset within  the meaning of s. 2(e) and would be liable to be included in the net wealth of the assessee. [26 B---C]     Vidya Varuthi v. Balusami Ayyar, 48 I.A. 302, 312, Abdul Karim Adenwalla v. Rahimabai, 48 Bom. L.R. 67, Commissioner, Hindu  Religious  Endowments,  Madras  v.  Shri  Lakshmindra Thirtha Swamiar of Sri Shirur Mutt. [1954] S.C.R. 1005, 1019 and   Commissioner  of  Inland Revenue v.  Crossman,  [1937] A.C. 26, referred to.. 20      Commissioner  of Wealth Tax, Bombay City v.  Purshottam N.Amersey & Anr. 71  I.T.R. 180, approved.     (ii)  When  the statute uses the words "if sold  in  the open  market"  it does not contemplate actual  sale  or  the actual state of the market, but only enjoins that it  should be  assumed that there is’ an open market and  the  property can be sold in such a market and on that basis the value has to  be  found  out.   It is a  hypothetical  ease  which  is contemplated  and the Tax Officer must assume that there  is an open market in which the asset can be sold. [26 E--F]     (iii) The contention, that the right to receive a  share of the income was a mere right to an annuity where the terms and conditions relating thereto precluded the commutation of any  portion  into a lump sum grant must be  rejected.   The word "annuity" could not be given its popular and dictionary meaning, but should be given the signification which it  has assumed  as a legal term owing to  judicial  interpretation. Where  the legislature uses a legal term which has  received judicial  interpretation courts must assume that  the  terms has  been used in the sense in which it has been  judicially interpreted. [26 G--H; 27 A--B]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION: Civil Appeals Nos.  2129  to 2132 of 1968.     Appeals from the judgment and order dated  December  4,’ 1964  of the Calcutta High Court in Tax Matters Nos. 69,  62 and 64 of 1963.     A.K.  Sen,  S.K.  Hazare and  P.K.  Mukherjee,  for  the appellants (in all the appeals).     B.  Sen, S. A. L. Narayana Rao and R.N.  Sachthey,   for the respondent (in ’all the appeals). The Judgment of the Court was delivered by     Groper, J.  These appeals by certificate from a judgment of  the Calcutta High Court involve a common  but  important question,  namely,  whether  the right  of  an  assessee  to receive  a specified share of the net income from an  estate in  respect of which Wekf-alal-aulad has been created is  an asset assessable to Wealth Tax.   By a deed dated November 19, 1928 as modified by a deed of rectification dated July 5, 1930 one  Golam  Hossain   Kasim Ariff,  a  muslim  governed by the  Hanafi   School  of  the Mohammadan  Law created a wakf in respect of his  properties in Noormul Lohia Lane and Armenian Street in Calcutta.   The settler appointed himself as the sole Mutwalli for the  term of  his  life and provided that after his  death  his  widow Aisha  Bibi  and his  sons would act as  Mutwallis  jointly. The  settler  died on January 1, 1937.  He left  behind  his

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widow  Aisha  Bibi  and three tons who  are  the  appellants before  this Court.  The wakf created was of the  nature  of Wakf-alal-aulad for the benefit of the settler’s wife, 21 children  and their descendants.  The extent of the  benefit conferred on them would appear from clause 5 of the deed  of wakf as modified:                     "5.  After payment of all necessary  out               goings   such   as   establishment    charges,               collections  charges, revenue taxes, costs  of               repairs,  law charges and other  expenses  for               the  upkeep  and management of the  said  Wakf               property,  the  Mutwalli  or  Mutwallis  shall               apply the net income of the said Wakf property               as follows, viz.:                   (a) In payment to me during the term of my               life  of one-fifth of the said net  income  by               monthly instalments.                   (b)  In payment to each of my sons  during               the respective terms of their lives  one-sixth               of the said net income by monthly instalments.                   (c)  In  payment  to my  wife  Aisha  Bibi               during  the term of her life one tenth of  the               said net income by monthly instalments.               The moneys payable as aforesaid to such of  my               sons as are minors shall until they attain the               age  of  majority  be  respectively   invested               (after   defraying  the   expenses  of   their               maintenance   and   education)   in     proper               securities or in landed property in   Calcutta               and such securities or property shall be  made               over  to the  said sons on their  respectively               attaining the age of majority." The  ultimate benefit in the case of complete  intestacy  of the  descendants  of  the  settlor  was  reserved  for  poor musalmans of Sunni community deserving help.     The  appellants  who are the  beneficiaries   under  the deed of wakf were paying income tax on the amount which  was being  received  by  them in terms of  that  deed  from  the Mutwalli.   In the year 1957 the Wealth Tax Act 27 of  1957, hereinafter  called  the Act, came into force.   During  the assessment years 1957-58 and 1958-59 the appellants were not only  assessed  to  income  tax in  respect  of  the  income received by them from the wakf estate but were also assessed to  Wealth tax by the Wealth Tax Officer on the  basis  that they had a share in the wakf estate.  The total value of the immovable  property belonging to the wakf estate was  valued at  20 times the annual municipal valuation and 16th of  the value   of  the  immoveable  property  along   with    other properties  was taken to be the net wealth of each assessee. Appeals were  taken to the Appellate Assistant  Commissioner of Wealth Tax but these were dismissed.  There were  further appeals  to  the  Income tax  Appellate  Tribunal  where  no dispute was  raised as  indeed  it could not be raised  with regard to the validity of the deed of wakf. 22 It  was  held  that the right of the sons  of  the  wakf  to receive  a  share  of  the rents and  profits  of  the  wakf property  was property or an interest in property and as  it was  not  limited in enjoyment to a period of six  years  it fell within the definition of the  term "assets" as  defined by  s.  2(e) of the Act.  The contention of  the  appellants that  the right of the beneficiaries under the deed of  wakf was  a mere right to an annuity as mentioned in s.  2(e)(iv) and  was, therefore, not an asset assessable to  wealth  tax

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was  rejected.  The  third argument which  had  been  raised before  the  Tribunal that the allowances  under  assessment were  payable  to the  beneficiaries by way  of  maintenance were  not  transferable  under s. 6(dd) of the  Transfer  of Property  Act  and therefore they had no market  value,  for inclusion in the net wealth was also refuted. It was pointed out that the right to maintenance was not one of the  assets mentioned in s. 5 which alone entitled an assessee to  claim exemption  in respect of certain assets.  The  Tribunal  did not  find it possible to hold on the facts of the case  that the amounts in dispute were receivable by the  beneficiaries as maintenance under the terms of the wakf.  As regards  the quantum of valuation a direction was made that the value  of the   assessee’s  life  interest may be capitalised  on  the basis  of the valuation table set out in  Park’s  Principles and  Practice of Valuations  taking  the  rent  security  at 6%.     On  applications for referring the question of law,  the following  common  question was referred to the  High  Court under s. 27 of the Act:                     "Whether on the facts and  circumstances               stated the right of the assessee to receive  a               specified  share  of the net income  from  the               Wakf Estate is an asset the capitalised  value               of which is assessable to Wealth-tax?" The  High Court negatived the contentions of the  appellants that the right to receive a definite share of the net income from  wakf property did not fall within the meaning  of  the word  "assets" as defined by s. 2(e) of the Act or  that  it was  a mere right to an annuity which under  the  Mohammedan Law could not be commuted into a lumpsum.  It was held  that the  fight of each assessee was to receive an aliquot  share of  the  net income of the properties which  were  made  the subject   matter  of  the  wakf   and  there  was  a   clear distinction  between  an  aliquot share  of  income  and  an annuity.   The High Court was of the view that even  if  the asset of the nature under consideration was non-transferable and  could  not be sold in the open market it could  not  be said  that such an asset had no value.  For the  purpose  of the  Act the Wealth Tax Officer must proceed to value it  as if it was an asset which was saleable in the market and that would  depend   on  actuarial valuation.  The  question  was consequently  answered in the affirmative and in  favour  of the revenue. 23                   The  definition  of the word  "assets"  as               given in s. 2 (e) of the Act to the extent  it               is material is in the following terms:                     (e)   "assets"  includes   property   of               every   description, movable or immovable  but               does  not  include--                     (iv) a right to any annuity in any  case               where   the  terms  and  conditions   relating               thereto   preclude  the  commutation  of   any               portion thereof into a lump sum grant;                     (v)  any interest in property where  the               interest  is  available to an assessee  for  a               period not exceeding six years ;" "Net  wealth" is defined by section 2(m). Section 3  is  the charging  valuation date of every individual etc. Section  4 gives  the financial year a tax in respect of the net wealth on the corresponding valuation date of every individual etc. Section  4  gives  the assets which have to be  included  in computing   the  net  wealth. Section 5 gives  those  assets which are exempt from and are not to be included in the  net

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wealth of the assessee. Section 7 (1) provides that value of any asset other than cash shall be estimated to be the price which,  in the opinion of the Wealth Tax Officer,, it  would fetch, if  sold in the open market,  on the valuation date.     It  is  to be essentially decided whether the  right  to receive an aliquot share of the net income of the properties which  were  made the subject matter of the  wakf  would  be covered by the definition of "assets" within the meaning  of s.  2(e) of the Act.  There can be no difficulty if  such  a right can be  regarded to be  property giving that word  the widest meaning as is  contemplated by  the language employed in the aforesaid clause.  The principal argument of Mr. A.K. Sen for the appellants is that the right to receive a  share of the income under a deed creating wakf-alal-aulad can,  by no stretch of reasoning,  be  regarded  to fall  within  the meaning  of  the  word  "property"  even  in  its  wide  and extended sense.  He has referred to the incidents of such  a right  with  particular  reference  to  the  Mohammedan  Law relating  to wakf.  That law owes its origin to a rule  laid down  by  the Prophet of Islam; and means "the tying  up  of property  in  the  ownership of God  the  Almighty  and  the devotion  of the profits for the  benefit of human  beings." Once it is declared that a particular property is wakf,  the right  of  the  wakf is extinguished and  the  ownership  is transferred   to  the  Mutawalli  (vide  Vidya  Varuthi   v. Balusami Ayyar(1).  Wakfs could be divided into two classes: (i)  public and (ii) private. A private wakf is one for  the benefit of the (1) 481.A. 302 atp. 312. 24 settlor’s  family and his descendants.  It is  called  Wakf- alal-aulad.  -Before  the enactment of  the  Mussalman  Wakf Validating  Act 1913, a wakf, exclusively for the benefit of the   settlor’s    family,  children  and   descendants   in perpetuity,   was  invalid.  It  was, however, valid if  the property was given in substance to charitable uses.  Section 3  of  the aforesaid Act declared it lawful  for   a  person professing the Mussalman faith to create a wakf which in all other respects was in accordance with the provisions of  the Mussalman law, for the following among other purposes :--                      "(a)  for the maintenance  and  support               wholly  or partially of his family,   children               or  descendants,  and                      (b) where the person creating a wakf is               a   Hanafi   Mussalman,  also  for   his   own               maintenance and support during his lifetime or               for the payment of his debts out of the  rents               and profits of the property dedicated;                      Provided  that the ultimate benefit  in               such cases expressly or impliedly reserved for               the poor or for  any other purpose  recognised               by the Mussalman law as a religious, pious  or               charitable purpose of a permanent character." As  mentioned  before,  the moment a wakf  is  created,  all rights  of  property pass out of the Wakif and vest  in  the Almighty.   Therefore,  the Mutawalli has no  right  in  the property belonging to the wakf.  He is not a trustee in  the technical  sense,  his  position  being  merely  that  of  a superintendent  or  a manager. A  Mutawalli  has  no  power, without  the permission of the court, to mortgage,  sell  or exchange  wakf  property or any part thereof unless  he   is expressly  empowered by the deed of wakf to do so: (ss.  202 and 207, Mulla’s Principles of Mahomedan Law, 16th Edn.)     In Abdul Karim Adenwalla v. Rahimabai(1), a  distinction was  made  between a settlor belonging to  the  Hanafi  sect reserving  for  his own maintenance and support  during  his

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lifetime the income of the trust property and has  reserving for  his  absolute use income of the whole of  the  property during  his  lifetime.  It was ’pointed out  that  a  Hanafi Mussalman was not permitted to follow the latter course  and it was only when he reserved the income for his  maintenance and  support  that  the  provisions  of  the Mussalman  Wakf Validating Act, 1913  would not be offended, There would  be a  difference  in  law between these two  provisions;  if  a settlor reserved to himself income for his own   maintenance and support that would not be transferable as property under the  Transfer  of Property Act nor would  it  be  attachable under  the provisions of the Civil Procedure Code.   If  he, however,  reserved for himself a life interest, s. 6 of  the Transfer of Property Act (1) 48 Bom. L.R. 67. 25 and s. 60 of the Code with regard to the non-transferability and  non-liability to an attachment would nor be  attracted. The  crux of the matter, according to Mr. Sen, is  that  the aliquot  share  of income under the deeds  executed  in  the present case was reserved for the maintenance and support of the wakf and other beneficiaries during their lifetime.   It is pointed out that if the provisions contained in cl. (5  ) of the deed of wakf were not to be read in that manner,. the deed would be rendered void a result which has to be avoided by  the   courts.  It is thus contended that the  right,  in question,  is a right to future maintenance measured by  the aliquot  part of the income and it is neither  partible  nor alienable,  and  is  one which is  wholly  personal  to  the beneficiary.  It lacks the basic attributes of property.     Now  "property"  is  a term of  the  widest  import  and subject to any limitation which the context may require,  it signifies every possible interest which a person can clearly hold or enjoy.  The meaning of the word "property" has  come up  for  examination before this Court in a number of cases. Reference  may be made to one of them in which the  question arose  whether  Mahantship  or  Shebaitship  which  combines elements of office and  property would fall within the ambit of  the word "property" as used in Article 19(1)(f)  of  the Constitution.  It was  observed  in the Commissioner,  Hindu Religious  Endowments,  Madras v. Shri  Lakshmindra  Thirtha Swamiar of Sri Shirur Mutt(1) that  there was no reason  why that   word  should  not  be  given  a  liberal  and’   wide connotation  and  should not be  extended  to   those   well recognised  types  of interests which had  the  insignia  or characeristics of proprietary right. Although Mahantship was not heritable like the ordinary property, it was still  held that  the  Mahant was entitled to claim protection  of  Art. 19(1)  (f)  of  the  Constitution.   It  is  stated  in  the Halsbury’s  Laws of England, Vol. 32 3rd Edn. page 534  that an annuity (which is a  certain sum  of money payable yearly either  as  a personal obligation of the grantor or  out  of property not consisting exclusively of land) can be an  item of  property  separate  and  distinct  from  the  beneficial interests  therein  and from ’the funds and  other  property producing  it     is property capable of passing on a  death and  can  be  separately valued for the  purpose  of  estate duty.     The  only direct case on the point under   consideration is  a decision of the Bombay High Court in  Commissioner  of Wealth  Fax,  Bombay  City  v.  Purshottam  N.  Amersey  and Another(2).  There the deed of settlement provided that  the trustees  shall  apply he net income from the fund  for  the support,  maintenance and advancement in life and  otherwise for the benefit of the settlor and is wife etc.  It was held

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that the definition of "assets" in s. 2(e) and that of  "net wealth" in s. 2(m) were comprehensive provi-  (1)  [1954] S.C.R. 1005, 1019.                      (2)  71 I.T.R. 180.  CI/70-3 26 sions and all assets were included in the net wealth by  the very definition. Therefore, when s. 3 imposed the  charge of wealth  tax on the net wealth it necessarily included in  it every  description of property of the assessee, movable  and immovable,  barring  the exceptions stated in s. 2  (e)  and other  provisions of the Act. We are in  entire  concurrence with that view.  There is no reason or justification to give any restricted meaning to the word "asset" as defined by  s. 2(e)  of the Act when the  language  employed shows that  it was intended to include property of every description.  On a proper  construction of the relevant  clauses in   the  wakf deed  we  are not satisfied that the aliquot  share  of  the income  provided for the beneficiaries was meant merely  for their  maintenance and support.  But even on the  assumption that  it was so intended or to preserve the validity of  the deeds  it should be so construed the right to the  share  of the income would certainly be an asset within the meaning of s. 2(e) and would be liable to be included in the net wealth of the assessee.     Mr.  Sen has laid emphasis on the language of s. 7 (1  ) of  the Act and has contended that the right to a  share  in the  income  is not capable of any valuation and  the  price which  it would fetch if sold in the open market, could  not possibly  be   ascertained.  Such  an  argument  was   fully examined  in  the  Bombay  case(1) in which the  High  Court referred  to the provisions of the English  statutes,  which were  in  pari  materia as also  decisions   given   by  the English  Courts including the one by the  House  of   Lord,’ (Commissioner  of Inland Revenue v. Crossman) (2).   It  has beet  rightly  observed  by the High  Court  that  when  the statute uses the words "if sold in the open market" it  does not  contemplate  actual  sale or the actual  state  of  the market,  but  only  enjoins  that I should be  assumed  that there is an open market and the property can be sold in such a  market and on that basis, the value has to be found  out. It  is a hypothetical case which  is  contemplated  and  the Tax  Officer  must assume that there is an  open  market  it which the asset can be sold.     A  faint  attempt  was  made  to  invoke  the  exception contained in s. 2(e) by suggesting that the right to receive a share of the income was a mere right to an  annuity  where the   terms  and conditions relating thereto  precluded  the commutation of any portion into a lump sum grant.  The  High Court  in the judgment under appeal dwelt at length  on  the true  meaning  and import of the  expression  "annuity"  and negatived  that  suggestion.  The burden of the argument was and  is that the word "annuity" should be given its  popular and  dictionary meaning and not the signification  which  it has  assumed  as  a  legal  term  owing  to  judicial  inter pretation.   Such a contention has only to be stated  to  be rejected (1) 71 I.T.R.180.                           (2) (1937)  A.C. 26. 27 because it is well settled that where the  legislature  uses a   legal term which has received  judicial  interpretation, the  courts must assume that the term has been used  in  the sense in which it has been judicially interpreted.     For  the reasons given above, the appeals fail  and  are

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dismissed with costs. (One hearing fee.) Y.P.                                      Appeals dismissed. 28