1966 (10) TMI 43 - SC - Income Tax

Whether the Roza properties were held in trust or under a legal obligation wholly for a religious purpose? Held that - Upon the facts found by the Appellate Tribunal we are of opinion that the Roza properties were held for a wholly religious purpose of a public character and therefore the income of the Roza properties was exempt from assessment under section 4(3)(i) of the Act. The appellant is entitled to exemption from being taxed on the ground that the income was derived from property held under a legal obligation wholly for a religious purpose. Decided in favour of the assessee

Summary

Issues Involved:
1. Whether the properties of the Hazrat Pir Mohamed Shah Saheb Roza Committee are held under trust or other legal obligation for public, religious or charitable objects.
2. Whether the income from the wakf properties for the relevant assessment years is entitled to exemption under section 4(3)(i) and/or 4(3)(ii) of the Indian Income-tax Act.

Issue-Wise Detailed Analysis:

1. Trust or Legal Obligation for Public, Religious or Charitable Objects:
The Supreme Court examined whether the Roza properties were held under a legal obligation wholly for a religious purpose. The Appellate Tribunal had found that the wakf was for a wholly religious purpose, specifically for the maintenance of the Roza and the mosque and the observance of festive occasions such as Urs and death anniversaries. This finding was supported by the fact that all Muslims, whether Murids or non-Murids, had unrestricted access to the Roza and the mosque, and the income from the Roza properties was used for their maintenance and for festive occasions. The High Court, however, had interfered with this finding, considering that the maintenance of madrassas and the library must be taken as one of the original purposes of the wakf. The Supreme Court held that the High Court had no justification for interfering with the Tribunal's finding, as the question of the object of the wakf is essentially a question of fact. The Supreme Court emphasized that the High Court must accept the findings of fact made by the Appellate Tribunal unless the party concerned has applied for a reference to challenge those findings. Therefore, the Supreme Court concluded that the Roza properties were held for a wholly religious purpose of a public character.

2. Exemption under Section 4(3)(i) and/or 4(3)(ii) of the Indian Income-tax Act:
The Supreme Court considered whether the income from the Roza properties was exempt from tax under section 4(3)(i) of the Indian Income-tax Act. Section 4(3)(i) states that any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes shall not be included in the total income of the person receiving it. The Tribunal had found that the original purpose of the wakf was confined to the maintenance of the Roza and the mosque and celebration of festive occasions, and therefore the wakf was established for a wholly religious purpose. The High Court had disagreed, considering that the maintenance of madrassas and the library was one of the original purposes of the wakf. The Supreme Court held that there was no evidence to show that any portion of the income of the wakf was utilized for madrassas or the library prior to 1942-43, and the allotment of money for these purposes did not alter the original character of the wakf. Therefore, the Supreme Court concluded that the income of the Roza properties was exempt from assessment under section 4(3)(i) of the Act.

Alternative Argument:
The appellant presented an alternative argument that the class of Murids constituted an appreciable section of the Sunni Bohra community, and the income from the Roza properties was exempt from assessment on the ground that the properties were held under a legal obligation for a wholly charitable purpose. The respondent argued that the class of Murids did not constitute a section of the community but was merely a fluctuating body of private individuals. The Supreme Court referred to the decision in Oppenheim v. Tobacco Securities Trust Co. Ltd., where it was held that a trust did not satisfy the test of public benefit if the nexus between the beneficiaries was employment by particular employers. However, the Supreme Court did not express a concluded opinion on this aspect, as it had already held that the appellant was entitled to exemption on the ground that the income was derived from property held under a legal obligation wholly for a religious purpose.

Conclusion:
The Supreme Court set aside the judgment of the High Court and answered the questions referred to the High Court in the affirmative and in favor of the assessee. The appeals were allowed with costs, and a consolidated hearing fee was awarded.