9911796707
|
Home
Issues Involved:
1. Whether the provisions made in the Wakf-deed dated 21st December 1923 for the maintenance, education, marriage, funeral, and other necessities of the poor and needy among the descendants of the Wakif in the male line, constitute a charitable purpose and fall within the scope of Section 4, clause 3(i), of the Indian Income-tax Act, 1922. 2. Whether the income allotted under the said Wakf-deed for the purposes mentioned in question No. (1) which remains unspent for want of beneficiaries is assessable in the hands of the Muthavalli. Detailed Analysis: Issue 1: Charitable Purpose Under Section 4(3)(i) The primary issue is whether the provisions for the maintenance, education, marriage, funeral, and other necessities of the poor and needy descendants of the Wakif in the male line constitute a charitable purpose under Section 4(3)(i) of the Indian Income-tax Act, 1922. The court examined the trust deed, which directed that half of the annual net income be utilized for the aforementioned purposes for the donor's family members in poor and needy circumstances. The other half was to be used for various charitable purposes, such as helping new converts to Islam, aiding Muslim orphans, providing secular education, helping poor and needy Muslims of the Sunni sect, spreading knowledge of Islam, and contributing to public institutions for these purposes. The court referred to the legal definition of "charitable purposes" as established by English law, which includes relief of poverty, education, medical relief, and the advancement of any other object of general public utility. The court emphasized that the expression "charitable purposes" must be construed strictly and applies only to public charities. There is no concept of a private charitable trust. The court cited the case of Commissioner for Special Purposes of Income-tax v. Pemsel, where Lord Macnaghten outlined the four principal divisions of charity in its legal sense. The court also referenced the Privy Council's judgment in The Trustees of Tribune Press, Lahore v. The Commissioner of Income-tax, Punjab, which stated that the test of general public utility is applicable to trusts under the Indian Income-tax Act, including Muslim wakfs and Hindu endowments. The court concluded that the provision for the benefit of the donor's descendants does not constitute a trust for general public utility, as the beneficiaries are limited to the donor's family members, making it a private trust. Therefore, the court answered the first question in the negative, stating that the provisions do not fall within the scope of Section 4(3)(i) of the Act. Issue 2: Assessability of Unspent Income The second issue is whether the income allotted under the Wakf-deed for the purposes mentioned in question No. (1) which remains unspent for want of beneficiaries is assessable in the hands of the Muthavalli. The court noted that the Muthavalli holds income belonging to a private trust. According to the Indian Income-tax Act, the income of a private trust is not exempt from taxation. The court cited the Bombay High Court's decision in Abubaker Abdul Rehman & Others, which held that if the income is found with the trustee, then the trustee is liable to be taxed. Given that the income in question remains unspent and is held by the Muthavalli, the court concluded that the Muthavalli is assessable for this income. Thus, the court answered the second question in the affirmative. Conclusion: The court answered the first question in the negative, indicating that the provisions for the donor's descendants do not constitute a charitable purpose under Section 4(3)(i) of the Indian Income-tax Act, 1922. The court answered the second question in the affirmative, holding that the unspent income is assessable in the hands of the Muthavalli. As a result, the assessee was required to pay the costs of Rs. 250.
|
