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PETITIONER: COMMISSIONER OF INCOME-TAX, KERALAAND COIMBATORE

       Vs.

RESPONDENT: PUTHIYA PONMANICHINTAKAM.  WAKFMANAGER P. P. AYESHA BI BI

DATE OF JUDGMENT: 14/08/1961

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. GAJENDRAGADKAR, P.B. HIDAYATULLAH, M.

CITATION:  1962 AIR  163            1962 SCR  (3) 137  CITATOR INFO :  R          1971 SC2463  (12)

ACT: Income  Tax-Wakf-Assessment-If  must  be in  the  status  of individual  or  as association of  persons-Mutawalli,  if  a trustee-Indian  Income-tax Act, 1922(11 of 1922), s.  41(1), First  proviso-Mussalman  Wakf Validating Act,  1913  (6  of 1913), ss.3,4.

HEADNOTE: The question for determination in the appeal was whether the wakf in question should be assessed to tax under s.41 (1) of the  Indian  Income-tax Act. 1922, through  the  manager  as individual  or as an association of persons at  the  maximum rate  under the first proviso to that section on the  ground that  the  individual  shares  of  the  beneficiaries   were indeterminate  and  unknown.   The wakf  deed  directed  the mutawalli  to do acts necessary for charitable purposes  and to  meet the maintenance expenses of the  wakif’s  children, grand-children,  the female children born in the future  and the male children born to the said female children and after payment  of  taxes and meeting of expenses  for  repairs,and maintenance  of  properties, to utilise the balance  of  the income  for daily necessary expenses of the house  and  for- food  for purchasing dresses and other necessities  for  the and  female members of the tarwad. for conducting  specified ceremonies,  for  feeding the poor and  for.  meeting  such. other then necessary expenses and thereafter to utilise  the balance,  if  any,  in acquiring  properties  yielding  good income. 138 Held  that under the terms of the wakf deed  the  individual shares  of the beneficiaries were indeterminate  within  the meaning  of  the  first proviso to s.41 (1)  of  the  Indian Income-tax Act, 1922, and as such the assessee was liable to pay income-tax thereunder at the maximum rate. It  was not correct in view of ss.3 and 4 of  the  Mussalman Wakf  Validating Act, 1913, to say that under the wakf  deed the  property vested in the Almighty and the  Mutawalli  did not  therefore, receive the income on behalf of  any  person within the meaning of s.41 (1) of the Indian Income-Tax  Act

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and as such the proviso could not come into operation. Under the Mahomedan law wakf property vests in the  Almighty only  in  an ideal sense and the Mutawalli,  acting  in  his name,   utilises  the  income  for  the  advantage  of   the beneficiaries.  The words "on behalf of any person" in  s.41 of’  the  Act, therefore, could only mean on behalf  of  the beneficiaries and not on behalf of the Almighty. Jewun Doss Sahoo v. Shah Kubeer-ood-deen, (1 841) 2 M.I. A.   390, referred to. Held,  further,  that there was no scope for  importing  the Mahomedan Law of wakf in s.41 of the Act since that  section in  express terms treated the Mutawalli as a trustee  though he  is  not one in the technical sense under  the  Mohamedan Law.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 397 of 1960. Appeal  from  the judgment and order  dated.’  November  24, 1958, of the Kerala High Court ill I.   T.  R.  No.  23   of 1957. K. N. Rajagopala Sastri and I P.C. Menon, for the appellant. A.   V. Viswanatha Sastri Narayanaswami and R.    Gopalakrishnan, for the respondent. 1961.   August 14.  The Judgment of the Court was  delivered by SUBBA  RAO,  J.-This appeal by certificate’ granted  by  the High Court of Kerala raises the question of the  application of  a.  41(1)  of the  Indian  Income-tax  Act  (hereinafter called.the Act) to the fact  of the case. 139 One  P.  B.  Umbichi  and his wife  executed  a  deed  dated December  20  191.5  creating thereunder  a  wakf  of  their properties.   It was provided therein., inter alia that  the income  from  the  properties mentioned  therein  should  be utilised  for  the maintenance of their  two  daughters  and their  children on the female side.  For 40 years  upto  and inclusive  of  the assessment year 1954-55,  the  income-tax assessments were made on the wakf through its manager  under s.  41 of the Act in the status of an individual.  But,  for the assessment year 1955-56, the Income-tax Officer  treated the  assessee  as  an association of persons,  and,  on  the ground   that   the   shares  of   the   beneficiaries   are indeterminate,  levied  tax at the maximum  rate  under  the first proviso to s. 41 of the Act.  On appeal, the Appellate Assistant  Commissioner of Income-tax held that the  Income- tax Officer was not right in holding that the members of the family  were indeterminate, but he confirmed the  assessment for the reason that, the shares were not specified among the individual  members  of  the family  and  also  between  the members of the family on the one hand and the charitable and religious purposes on the other, the first proviso to s. 41- would be applicable to the assessee.  On further appeal, the Income-tax  Appellate  Tribunal  took  the  View  that   the proprietary rights in the property in question vested in the Almighty  and that the Mutawalli was only to look after  ant administer  the properties as a manager and, therefore,  the proper person in whose hands the income from the  properties should  be  assessed was the Mutawalli in his status  as  an "individual"  at the rates applicable to an individual.   ID that, view, the appeal was allowed.  At the instance of  the Commissioner of Income-tax, the ’Appellate Tribunal referred to  the High Court of Kerala the following question for  its determination :

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             "Whether in the facts and circumstances of the               case,  the  first  proviso to  section  41  is               applicable".               140 The   High  Court  held  that  the  said  proviso  was   not applicable,  as  under the wakf deed the  beneficiaries  and their  shares  were ascertainable.  Aggrieved by  the  said order,  the  Commissioner of Income-tax  has  preferred  the present appeal. Mr. Rajagopala Sastri, learned counsel for the  Commissioner of Income-tax, contended that on a fair reading of the terms of  the wakf deed it would be clear that the  Mutawalli  was only directed to maintain the members of the family, that none  of  the members of the family  had  any  ascertainable &hare in the income, and that, therefore, the case  squarely fell within the first proviso to s. 41 of the Act. Mr. Viswanatha Sastri, learned counsel. for the  respondent, in  addition to his attempt to sustain the construction  put upon  the  wakf deed by the High Court, contended  that  the instant case fell outside the scope of s. 41(1) of the Act, as the Mutawalli was only receiving the income, on behalf of the  Almighty,  that the Almighty was not  a  "Person",  and that,  therefore, as the main, section (lid not  apply,  the proviso  also would not be attracted, with the  result  that the   Muta   award  would  have  to  be   assessed   as   an "individual".. As the argument turns upon the construction of s. 41 of  the Act,  it  will  be  convenient at"the  outset  to  read  the relevant parts thereof.               "Section  41  :  (1) In the  case  of  income,               profits  or  gains chargeable under  this  Act               which...... any trustee or trustees  appointed               under  a  trust declared by  a  duly  executed               instrument in writing whether testamentary  or               otherwise,  including the trustee or  trustees               under any Wakf deed which is valid. under  the               Mussalman  Wakf  Validating  Act  1913, are               entitled to receive on: behalf of any  person,               the ’tax shall be levied upon and  recoverable               from such...... trustee trustees,               141               in  the like manner and to the same amount  as               it  would  be leviable  upon  and  recoverable from the pers on on whose behalf such  income.               profits-or gains are receivable, and all the               provisions-of    this    Act    shall    apply               accordingly-:               Provided  that where any such income,  profits               or   gains  or  any  part  thereof   are   not               specifically  receivable on behalf of any  one               person,  or where the individual  shares  of-               the   persons   on  whose  behalf   they   are               receivable  are indeterminate or unknown,  the               tax  shall  be levied and recoverable  at  the               maximum rate, but, where such persons have  no               other  personal income chargeable  under  this               Act   and  none  of  them  is  an   artificial               juridical  person, as if such income,  profits               or gains or such part thereof were the,  total               income of an association of persons." This section in term s applies to a trustee under  a  wakf deed  which  is valid under the  Mussalman  Wakf  Validating Act,, 1913.  Under the substantive part of. the section, tax is  leviable on the trustee of the wakf in the  like  manner and  to  the same amount as it would be  leviable  upon  and

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recoverable  from  the  beneficiary,that  is,the  assessment would  be at the-individual rates of tax applicable  to  the beneficiary.  But, under the first proviso to that  section, there  are  two exceptions to the general  rule,  viz.,  (1) where  the income is not specifically receivable  on  behalf of  anyone person; and (ii) where the individual shares  of- the  persons  on whose behalf the income is  receivable  are indeterminate  or unknown.  In those two  circumstances  tax shall be levied and recoverable at the maximum rate.  It  is agreed  that  the  first exception does not  apply  to   the instant case.  But the question that falls to be decided  is whether the individual shares of the persons on whose behalf the income is receivable are indeterminate or unknown.   The answer to the question depends upon the construction of the 142 provisions of the Wakf deed.  The Wakf deed was executed  on December  20, 1950 by Umbichi and his wife dedicating  their entire property, moveable and immoveable, of total value  of rupees  one  lakh for the objects  mentioned  therein.   The Mutawalli  appointed thereunder was directed to  manage  the properties  in  such  a way as "to  do  acts  necessary  for charitable purposes and, to meet the maintenance expenses of their  children and grand-children and the  female  children that  might  be  born to them in future,  and  to  the  male children  born to the said female children".   The  document proceeded  to  give  further  specific  directions  in   the management  of the properties.  After payment of  taxes  and meeting the expenses incurred for repairs and maintenance of the properties, the balance of the income should be utilised for  the  "daily necessary expenses of the  house  and  food expenses  as we are doing now", and for purchasing  "dresses and  other necessities for the then male and female  members of  the  tarwad" and for  conducting  "nerchas  (ceremonies) ,such  as Yasin, Moulooth, etc., charitable  ceremonies  for feeding the poor and such other necessary expenses , and out of  the  balance,  if any, the  Mutawalli  was  directed  to acquire  properties yielding good income.  The rest  of  the recitals  in the document are not relevant for  the  present purpose.. Can  it  be said that, under the  document,  the  individual shares  of the beneficiaries are specified ?   The  document does not expressly specify the shares of the  beneficiaries; nor  does it do so by necessary implication.   Indeed,’  the individual  shares of the beneficiaries Are not  germane  to the objects of the document.  The Mutawalli was directed  to bear,   out  of  the  income  the  expenses  necessary   for maintaining  the  members of the tarwad and to  conduct  the necessary  religious  ceremonies.  The distribution  of  the family   income  and:  family  expenses  was  left  to   the discretion of the 143 Mutawalli,  the document also further contemplated that  the Mutawalli by his prudent and efficient management would save sufficient   amounts   for   purchasing   properties.    The ’directions  indicate  beyond any reasonable doubt  that  no specified  share  of  the income was given  to  any  of  the benefit series, and their right was nothing more, than to be maintained  having regard to their  reasonable  requirements which were left to the discretion of Mutawalli.  While it is true that the number of beneficiaries would be ascertainable at any given point of time, it is not possible , to hold, as the   High   Court  held,  that  under  the   document   the beneficiaries   had  equal  shares  in  the   income.    The beneficiaries had no specified share in the income, but only

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had the right to be, maintained.  The construction put  upon the  document  by  the  High  Court  cannot,  therefore,  be sustained  on  the  plain wording  of  the  document.   ’We, therefore  bold  that under the terms of  the  document  the individual  shares  of the beneficiaries  are  indeterminate within  the meaning of the first proviso to s. 41(1) of  the ’Act.   If  so,  under the said  proviso,  the  assessee  is ,liable to pay income-tax, at the maximum rate.  The  alternative  contention of learned  counsel  ’for  the respondent  remains to be considered.  The argument is  that ’under  the  Wakf deed the properties vest in  the  Almighty and,  therefore, the Mutawalli receives the income ’only  on behalf  of  the  Almighty and not on behalf  of  any  person within the’ meaning of s. 41(1) of the Act, with the  result that  s.  41(1)  is  not applicable  to  the  assessment  in question.   The  argument is rather subtle, but  it  has  no force.  There are three effective answers to this contention Firstly,  it was not raised before the High  Court-the  only question  argued  before  the High  Court  was  whether  the beneficiaries  of the trust and their individual  shares  of the income of the trust were ascertainable. 144 Secondly,  though  under the Mahomedan  Law  the  properties dedicated  under a Wakf deed belong to the Almighty,  it  is only  in the ideal sense, for the Mutawalli in the  name  of the  Almighty utilises the income for the purposes  and  for the  benefit of the beneficiaries mentioned therein.   Under the  Mahomedan Law, the moment a Wakf is created all  rights of  property pass out of the wakf and vest in the  Almighty. ’The  property  does not vest,in the, Mutawalli, for  he  is merely  a manager and not a trustee in the technical  sense. ’Though Wakf property belongs to the Almighty, the practical significance  of that concept is explained ill  Jeuwun  Dass Sahoo v. Shah Kubeer-ood-deen (1) thus :               "...................   Wakf   signifies    the               appropriation of a particular article in. such               a manner as subjects it to the rules of divine               property,  whence the appropriator’s right  in               it is extinguished, and it becomes a  property               of  God, by the advantage of it  resulting  to his creatures ." That  is, though in an ideal sense the property yet  in  the Almighty,  the  property  is held for  the  benefit  of  His creatures, that is, the beneflciaries.  ’Though at one  time it was considered that to constitute a valid Wakf there must be  dedication of property solely to tbe Worship of  God  or for  regious  or charitable, purposes, the  Wakf  Validating ,Act,  1913, discarded that view and enacted by s. 3 that  a Mussalman can create a wakf for the maintenance and support, wholly   or   partially,   of  his   family,   children   or descendants,provided  the ultimate benefit is  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.  Section 4  of the said Act, goes further and says that a wakf shall not be invalid by the mere’ circumstance that tile benefit (1) (1840)2. M.I.A. 390, 421. 145 reserved  for  the  poor  or  for  religious purposes   is postponed  until  the  extinction  of  the  family  It   is, therefore,  manifest  that  under  the  Mahomedan  Law,  the property  vests  only in the Almighty,  but  the  Mutawalli, acting  in’ His name, utilises the income for the  advantage of  the beneficiaries.  Therefore, the words ,,on behalf  of any person" in s. 41 of the Act , can only mean on behalf of

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the beneficiaries and not on behalf of the Almighty. The third and more effective answer to the argument is  that s.  41(1) of the Act provides for a vicarious assessment  in order  to facilitate the levy and collection of  income-tax’ from  a trustee in respect of income of the’  beneficiarios. In  express  terms it equates the Mutawalli of a wakf  to  a trustee.  For the purpose of S. 41 the Mutawalli is  treated as a trustee and, on the analogy of a trustee, he holds  the property for the benefit of the beneficiaries.  There is  no scope for importing the Mahomedan Law of Wakf in s. 41  when the  section  in  express terms treats the  Mutawalli  as  a trustee, though he is not one in the technical sense  ’under the Mahome’dan Law.  If the argument of learned counsel  for the  respondent be accepted, it would make s. 41 of the  Act otiose  so far as wakfs are concerned, for in every case  of wakf  the property I would be held for the Almighty and  not for  any person.  We, therefore, reject this contention  and answer the question in the affirmative. In the result, we set aside the order of the High Court  and hold  that  the,  respondent was  rightly  assessed  by  the Income-tax  Officer  at  the maximum rate.   The  appeal  is allowed with costs. Appeal Allowed. 146