1978 (9) TMI 53 - SC - Indian Laws

Whether section 8(1) of the Orissa Agricultural Income-tax Act, 1947, suffers from the vice of discrimination and as such is hit by art. 14 of the Constitution ? Held that - Even if the instrument of wakf is a composite one partly incorporating a public wakf and partly a private wakf that part which deals with public wakf will fall under s. 8(1) and the other part will be covered by s. 9, for, the language of s. 8(1) is wide enough to include such a deed to the extent that it incorporates a public wakf. In other words, Muslim trusts, i.e., wakfs other than wakf-alal-aulad, would be covered by s. 8(1) and to such wakfs the limited exemption contemplated by s. 8(1) would apply. If that be so, the gravamen of complaint that all wakfs (Muslim trusts) other than wakf-alal-aulad are receiving favourable treatment as against non-Muslim public charitable trusts must fall to the ground. As regards Muslim trusts which are in the nature of wakf-alal-aulad, which alone are covered by s. 9, the proviso clearly shows that the share of the beneficiary under such a trust, far from being exempted, is brought to tax and the tax is made realisable from the mutawalli and read with the proviso the main provision really confines the benefit of exemption only to ultimate illusory or remote, public charitable or religious purpose and is thus completely consistent with the object and scheme of the Act. In the result, we are clearly of the view that s. 8(1) of the Act is free from the vice of discrimination under art. 14 of the Constitution and the said provision is perfectly valid and constitutional. Appeal dismissed .

Summary

Issues Involved:
1. Whether section 8(1) of the Orissa Agricultural Income-tax Act, 1947, is discriminatory and violates Article 14 of the Constitution.
2. Whether the Act accords favorable treatment to Muslim trusts (wakfs) compared to non-Muslim public charitable trusts.

Issue-wise Detailed Analysis:

1. Discrimination and Violation of Article 14:

The primary issue raised in this appeal is whether section 8(1) of the Orissa Agricultural Income-tax Act, 1947, suffers from discrimination and is thus violative of Article 14 of the Constitution. The petitioner, a trustee of an ancient public Hindu religious trust, challenged the constitutional validity of section 8(1) on the grounds that it discriminates against non-Muslim public trusts. The petitioner argued that under section 8(1), only the agricultural income actually spent for charitable or religious purposes is exempt from taxation, whereas, under section 9, all agricultural income of Muslim trusts (wakfs) is exempt, irrespective of its utilization.

On examining the provisions, the court noted that section 8(1) provides an exemption for income actually spent on charitable or religious purposes for non-Muslim public trusts. In contrast, section 9 exempts all agricultural income of Muslim trusts referred to in section 3 of the Mussalman Wakf Validating Act, 1913, from taxation. The court considered whether this differentiation constituted hostile discrimination without a reasonable nexus to the objective of the statute, which is to tax agricultural income while providing exemptions for public charitable or religious purposes.

2. Favorable Treatment to Muslim Trusts:

The petitioner contended that section 9 of the Act covers all Mussalman wakfs, not just wakf-alal-aulad, thereby granting a blanket exemption to all Muslim trusts, which is discriminatory. However, the respondents argued that section 9 specifically pertains to wakf-alal-aulad, a distinct class of Muslim trusts, and other Muslim trusts fall under section 8(1) with the same limited exemption applicable to non-Muslim trusts.

The court analyzed the provisions of section 3 of the Mussalman Wakf Validating Act, 1913, which allows Muslims to create wakfs for family maintenance and support, provided the ultimate benefit is reserved for charitable or religious purposes. The court concluded that section 3 refers specifically to wakf-alal-aulad, and thus, section 9 of the Orissa Agricultural Income-tax Act applies only to this type of wakf.

The court further clarified that the legislative intent behind sections 8(1) and 9 was to provide limited exemptions for agricultural income spent on charitable purposes, and section 9's exemption for wakf-alal-aulad aligns with this intent. The court found that the proviso to section 9, which taxes the beneficiary's share, supports the consistency of the Act's objective.

Conclusion:

The court concluded that section 8(1) of the Orissa Agricultural Income-tax Act, 1947, does not suffer from the vice of discrimination and is not violative of Article 14 of the Constitution. The differentiation between non-Muslim public trusts and Muslim trusts (wakf-alal-aulad) is based on reasonable classification and does not accord favorable treatment to Muslim trusts in a manner inconsistent with the Act's objectives. Therefore, the appeal was dismissed with costs.

Judgment:

The appeal was dismissed, and section 8(1) of the Orissa Agricultural Income-tax Act, 1947, was upheld as valid and constitutional. The court found no discrimination under Article 14 of the Constitution.