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PETITIONER: COMMISSIONER OF INCOME-TAX, MADRAS

       Vs.

RESPONDENT: MANAGING  TRUSTEES,  NAGORE DURGHA,  NAGORE

DATE OF JUDGMENT: 08/04/1965

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. SHAH, J.C. SIKRI, S.M.

CITATION:  1966 AIR   73            1965 SCR  (3) 659  CITATOR INFO :  R          1971 SC2463  (14)

ACT: Wakf--Scheme for management of Muslim Wakf--Trustees  called Nattamaigars  to manage wakf property--Surplus income to  be distributed    among   beneficiaries   of    trust    called kasupangudars   according to definite shares--Income how  to be assessed--Applicability of Indian Income Tax Act, 1922(11 of 1929.), s. 41.

HEADNOTE: A  scheme was settled in 1955 by the Madras High Court   for the  management of the income and properties of  the  Durgah consecrated to a saint in Tanjore District. Under the scheme the management of the properties of the Durgah was to be  in the hands of eight trustees called Nattamaigars one of  whom was  to  be  elected  by them as Managing Trustee.  The  net income of the trust was to be distributed among  descendants of the foster son of the saint, called Kasupangudars,  whose definite  shares were to be determined each year by  a  list prepared by the Managing Trustee.  For the assessment  years 1953-54  and  1954-55, the Income-tax Officer  assessed  the surplus  income  of the wakf in the hands  of  the  Managing Trustee   as  an  association  of  persons.   The   trustees unsuccessfully   appealed   to   the   Appellate   Assistant Commissioner  and  the Appellate Tribunal.  The  controversy centred  round  the  question  whether s.41  of  the  Indian Income-tax  Act,  1922 applied to the case. In  a  reference made  by  the Tribunal at the instance of the  assessee  the High Court held that that s. 41 applied to the case and that the  income  was received by the trustees on behalf  of  the beneficiaries.  Aggrieved,  the Commissioner of  income  Tax appealed, by certificate, to this Court.     It was contended on behalf of the appellant that as  the properties  vested in the managing trustee and  he  received the  income  in  his  own right and not  on  behalf  of  the beneficiaries, though for their benefit, the said income  in the hands of the managing trustee fell outside the scope  of s.41 of the Act. HELD:  The High Court had rightly answered the  question  in favour of the assessee.

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(i)  The technical doctrine of vesting is not imported  into s.  41.  This  is  apparent from the  fact  that  a  trustee appointed   under a trust deed is brought under the  section though  legally the property vests in him. In the case of  a Muslim Wakf the property vests in the Almighty; even so  the mutawallis  are brought under the section. Thus in  some  of the persons enumerated in the section property vests and  in others  it  does not. A  reasonable  interpretation  of  the section is that all categories of persons mentioned  therein are  deemed to receive them on behalf of another  person  or persons or manage the same for his or their benefit. None of them has  any beneficial interest in the income; he collects the  income for the benefit of others. In this view even  if the Nattarnaigars were trustees in whom the 65 660 properties  of the Durgah vested, they should be  deemed  to have received the income only on behalf of the Kasupangudars in definite shares. [662G-663B]    (ii)  The mutawalli of a Muslim Wakf is merely a  manager and  not  a "trustee" as understood in the  English  system. [663E]    Vidya  Varuthi Thirtha v. Balusami Ayyar, (1921) 48  I.A. 32  and Allah Rakhi v. Mohammad Abdur Rahim, (1933) 61  I.A. 50, relied on.     Therefore  in terms of s.41 of the Act the  Nattamaigars were  the manager of the properties on behalf of  other  and were  entitled to receive the income therefrom on behalf  of them. [663G-H]     (iii)  Under c1.3 of the scheme it was  the  "management and  administration" of the Durgah and its properties  which was  vested  in  the Nattamaigars  and  not  the  properties themselves.  In the absence of clear words it could  not  be held  that  the  High  Court in framing  a  scheme  for  the endowments  of the Durgah had  introduced a foreign  concept of  "trust"  in  derogation of Mohammadan  Law.  The  scheme therefore  did not vest the properties of the Durgah in  the Nattamaigars  and the contention on behalf of  the   Revenue could not succeed. [664D, E]

JUDGMENT: CIVIL  APPELLATE JURISDICTION:  Civil Appeals Nos.  213  and 214 of 64.     Appeals from the judgment and order dated April 4, 1961, of the Madras High Court in Case Referred No. 130 of 1956.     Niren De,Additional Solicitor-General R. Ganapathy  Iyer and R.N. Sachthey, for the appellants (in both the appeals.     A.   V.   Vishwanatha  Sastri,  M.M.   Ismail   and   R. Gopalakrishnan, for the respondent in both the appeals. The Judgment of the Court was delivered by     Subba  Rao,  J.  In  the  t,own  of  Nagore  in  Tanjore District,  Madras  State, there is a Durgha  consecrated  to Hazerath Sayed Shahul Hameed Quadir Ali Ganja Savoy Andavar, who lived some 400 years ago. The said Durgha receives large income  from  immovable  properties endowed to  it  and  the offerings in cash and kind made by the devotees. The  Durgha and its properties are now being administered under a scheme settled  by the Madras High Court on March 16,  1955.  Under the  scheme  the  management of the  administration  of  the affairs of the said Durgha vests hereditarily in 8  trustees called Nattamaigars, who constitute a board of trustees. The said board of trustees shall from among themselves elect one as a managing trustee and he shall hold office for a term

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   of  3  years. The managing trustee shall at the  end  of each  fasli prepare a balance-sheet verified by the  manager and  ascertain  the  net amount  available  for  payment  to kasupangudars,  who are the descendants of  Saiyed  Muhammed Eusoof,  the foster son of the saint. The  Managing  Trustee shall  declare  the  amount due to  each  of  the  kasupangu (share)  and shall allocate the amount to each  kasupangudar (sharer) in the list to be prepared for that purpose 661 in  each year. He shall pay the amount to each  kasupangudar in  accordance  with the list. It is said  that  at  present there  are   640  kasupangudars. Briefly  stated  under  the scheme the management of the properties of the Durgha,  both movable  and  immovable,  vests  in  Nattamaigars,  and  the kasupangudars  are  entitled  to the surplus  in  accordance with their shares.     For the assessment years 1953-54 and 1954-55 the Income- tax Officer assessed the surplus income in the hands of  the Managing Trustee as an association of persons. The Appellate Assistant  Commissioner, on appeal, confirmed the  same.  On further  appeal, the Income-tax Appellate Tribunal took  the same  view.  At the instance of the assessee,  the  Tribunal submitted the following question for the opinion of the High Court of Madras under s.66(1) of  the Income-tax Act.  1922, hereinafter called the Act:       "Whether  the provisions of Section 41 can be said  to apply to the assessees in this case."     A  Division  Bench of the High Court,  which  heard  the reference.  held that the Managing Trustee qua  the  surplus income managed the property and derived the income on behalf of the kasupangudars and that the assessment  should be made on  the said Managing Trustee to the extent of the  interest of each of the kasupangudars in the income received by  him. In  the result it answered the question in  the  affirmative and  in favour of the assessee. The Commissioner of  Income- tax, Madras, on a certificate of fitness granted by the High Court,  has preferred the present appeals against  the  said Order.     The learned Additional Solicitor General, appearing  for the Revenue, contended that the Natmaigars  being  trustees, the properties of the Durgha vested in them and,  therefore, they   or  the  Managing  Trustee  administered  the   trust properties  in  their  own right and not on  behalf  of  the kasupangudars and hence s.41 of the Act did not apply,  with the  result the Income-tax Officer had rightly assessed  the surplus   income  in  the  hands  of  the  trustees  as   an association of persons.     Mr.  A.V.  Viswanatha Sastri, learned  counsel  for  the assessee  respondent,  argued, on the other hand,  that  the Nattamaigars  of the Durgha were not trustees as  understood in  the  law of trust but were only  managers  managing  the properties  on  behalf of the Durgha and  kasupangudars.  On that   assumption,   his   argument   proceeded.   as    the Nattamaigars, as managers, held the surplus on behalf of the kasupangudars  for distribution in definite shares, s.41  of the Act was attracted.     At  the outset we may make it clear that in this  appeal we  are  concerned only with the surplus remaining  on  hand with  the  Nattamaigars after meeting the  expenses  of  the Durgha. 662     The  problem  presented  in these appeals  falls  to  be decided  on  a  true construction of s.41 of  the  Act.  The material part of s.41 reads:                     (1)  In the case of income,  profits  or

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             gain  chargeable  under this  Act,  which  the               Courts  of Wards, the  Administrators-General,               the  Official  Trustees  or  any  receiver  or               manager  (including  any person  whatever  his               designation  who in fact manages  property  on               behalf  of another) appointed by or under  any               order  of a Court, or 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  re ceive  on               behalf of any person, the tax shall be  levied               upon  and  recoverable  from  such   Court  of               Wards,     AdministratorsGeneral,     Official               Trustee,  receiver  or manager or  trustee  or               trustees,  in the like manner and to the  same               amount  as  it  would  be  leviable  upon  and               recoverable from the person                     on whose behalf such income, profits  or               gains  are receivable, and all the  provisions               of this Act shall apply accordingly.     Under  this section the income of properties  receivable by  the  enumerated  persons for the benefit  of  others  is liable  to   be assessed to tax in their hands in  the  like manner  and to the same amount as it would be leviable  upon and  recoverable from the person or persons on whose  behalf such income is receivable. This section centres on the basic fact that the person in whose hands the income is assessable shall  be  entitled to receive the  same on  behalf  of  any person;  if  he is not so entitled, the  provisions  of  the section cannot be invoked. So. it is contended that, as  the properties  vested in the managing trustee and  he  received the  income  in  his  own right and not  on  behalf  of  the beneficiaries, though for their benefit,, the said income in the hands of the  managing trustee fell outside the scope of s.41 of the Act.     There  are two answers to this contention. The  doctrine of vesting is not germane to this contention. In some of the enumerated perso,ns in the section the property vests and in others it does not vest, but they only manage the  property. In  general law the property does not vest in a receiver  or manager  but  it vests in a trustee, but both  trustees  and receivers are included in s.41 of the Act. The common thread that  passes  through  all of them  is  that  they  function legally  or factually for others: they manage  the  property for  the benefit of others. That the technical  doctrine  of vesting is not imported in the section is apparent from  the fact that a trustee appointed under a trust deed is  brought under the section though legally the property vests in  him. In  the  case  of a Muslim Wakf the property  vests  in  the Almighty;  even  so  the mutawallis are  brought  under  the section. A reasonable interpretation of the 663 section  is  that all the categories  of  persons  mentioned therein  are  deemed  to receive the  income  on  behalf  of another  person  or persons or manage the same  for  his  or their  benefit. None of them has any beneficial interest  in the  income;  he  collects the income  for  the  benefit  of others. In this view, even if the Nattamaigars were trustees in whom the properties of the Durgha vested, they should  be deemed  to  have received the income only on behalf  of  the kasupangudars in definite shares.

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   The same conclusion will be reached even if the  problem was  approached  from a different angle. In  the  well-known decision  of the Privy Council in Vidya Varuthi  Thirtha  v. Balusami  Ayyar(1) the inappropriateness of the use  of  the expression "trustee" to the manager of a Hindu or Mahommedan religious   endowments  was  brought  out.   Therein   their Lordships observed:                     "Neither under the Hindu Law nor in  the               Mahommedan system is any property   "conveyed"               to a  shebait or a mutawalli, in the case of a               dedication. Nor is any property vested in him;               whatever property he holds for the idol or the               institution  he holds as manager with  certain               beneficial  interests regulated by custom  and               usage. Under the Mahommedan Law, the moment  a               wakf is  created  all rights of property  pass               out of the wakf, and vest in God Almighty. The               curator,    whether  called    mutawalli    or               saijadanishin, or by any other name, is merely               a manager. He is certainly not a "trustee"  as               understood in the English system."     The  Privy Council, in the context of a  wakf  property, reaffirmed the said observations, in Allah Rakhi v. Mohammad Abdur  Rahirn(2). The effect of the said decisions  is  that Nattamaigars  are  only the managers of  the  properties  in which  the  Durgha  and the  kasupangudars  have  beneficial interests.  The   properties   do  not vest  in  them.  They receive  the  income therefrom on behalf of  both  of  them. After  meeting  the expenses of the Durgha  they  hold  the. balance  on behalf of the kasupangudars and  distribute  the same in accordance with their shares. In this view, in terms of s. 41 of the Act the Nattamaigars are the managers of the properties on behalf of others and, are entitled to  receive the income therefrom on behalf of them. With the result, the income which they hold on behalf of the kasupangudars can be assessed  only  in  their hands  in  the  manner  prescribed thereunder. But it is said that whatever may the doctrine of Hindu  or Mohammadan law, under the terms of  the  aforesaid scheme  the  properties  vested  in  the  Nattamaigars  and, therefore,  they receive the income in their own right  and* not on behalf of the kasupangudars. A careful reading of the relevant (1)(1921) L.R. 48 I.A. 302, 315. (2) (1933) L.R.61.’. I.A. 50. 664 part  of  the  scheme does not  countenance  this  argument. Clause 3 of the scheme, which is the material clause, reads:                     "The  management and  administration  of               the  affairs of the Nagore Durgha  at  Nagore,               Tanjore   District,  and  other  thakias   and               shrines  connected  therewith  (mentioned   in               Schedule     A     hereunder)     and      all               properties--movables  and’   immovables--which               belong  to  or have been or may  hereafter  be               given,   dedicated,  endowed  thereto,   shall               subject   10  the  provisions   thereof   vest               hereditarily   in   the  eight   trustees   or               nattamaigars   of   the   Durgha   who   shall               constitute the Board of Trustees. Each trustee               or nattamaigar is entitled to hold’ office for               life,  and  after him  the  trusteeship  shall               devolve on his next male heir  in   accordance               with the custom prevailing in respect of  such               office in the Durgha."     Under  this clause the management and administration  of

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the   Nagore   Durgha  and  its  properties  vest   in   the Nattamaigars.  What  vests in the Nattamaigars  is  not  the properties   of   the   Durgha  but   the   management   and administration  thereof. Unless the words are clear  we  are not prepared to hold that the High Court in framing a scheme for  the endowments of the Durgha had introduced  a  foreign concept  of "trust" in derogation of Mohammadan   law.  ’We, therefore, hold that the scheme did not vest the  properties of the Durgha in the Nattamaigars. Lastly, a faint argument was raised to the effect that under the scheme the managing trustee was not appointed  under any order of a Court but was appointed by an agreement among the trustees.  But in cl. 4 of the scheme the High Court gave  a specific  direction  that  the  managing  trustee  shall  be elected  from  among  the Board of  Trustees.  The  Managing Trustee elected was certainly appointed under an order of  a Court,  for the election was held pursuant to the  order  of the  Court. That apart, in the view we have  taken,  namely, that the Nattamaigars are not trustees in the English  sense of the term, this question does not arise for consideration.     In  the result, we hold that the High Court has  rightly answered the question referred to it in the affirmative  and in  favour  of  the  assessee.  The  appeals  fail  and  are dismissed with costs. One hearing fee. Appeals dismissed. 665