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TMI Blog1941 (3) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly set apart for carrying out the purposes of the trust. The income of the trust was to be utilised in the manner set out below: (1) Out of the gross annual income of the trust properties, municipal and Government taxes, expenses for the maintenance and repairs to the properties and management expenses were first to be met. (2) Out of the balance 10% was to be set apart every year as a reserve fund. (3) Half the annual net income after meeting the above charges was to be utilised for the expenses of maintenance, education, marriage, funeral and other necessities of such members of the Wakif's (donor's) family in the male line including the daughters of the male members in the male line (but not the children of such daughters) as were in the opinion of the Muthavalli in poor and needy circumstances and had no income to meet their necessities, provided the Muthavalli himself cannot take any benefit out of the Wakf funds except where he was in poor and needy circumstances and had no means to meet his necessities. (4) The remaining half was to be utilised for such charitable purposes as (a) helping new converts to Islam by giving them religious instructions (b) gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akif, which brought such income within the exemption conferred by Section 4(3)(i) of the Act as the purpose was charitable whether the income was spent upon needy relations or upon the needy public, that no part of the income so set apart for the benefit of poor relations had been used for that purpose during the period under consideration but that the whole of it had been added on to the reserve fund, and that the trustee was not liable to be taxed as the income had to be taxed only in the hands of beneficiaries and that as there were no beneficiaries there could be no assessment. The Income-tax Officer overruled these objections and held that since there was a provision in the trust deed to the effect that the moneys of the trust should be utilised to meet the necessities of the needy public of a certain class there was no need to earmark a certain portion of the income to be used on the Wakif's poor relations, that such a provision could not be said to be for the advancement of any object of general public utility and that a special provision of this kind made the trust to that extent noncharitable. He also held that the liability of the trustee to be assessed was to be deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligious or charitable purposes in Section 4 (3)(i) were to be construed with reference to the general law and not to the personal law of the subject and that property held under a Wakf deed created for the maintenance of the donor and his children and thereafter for the maintenance and support of his family, the ultimate benefit on the extinction of his line being reserved for orphans and widows was not property held under trust wholly for religious or charitable purposes within the meaning of Section 4(3)(i) of the Act. This decision has been affirmed by the Patna High Court in the case of Humayan Raza Choudhury v. Commissioner of Income-tax, Bihar and Orissa[2]. The facts of this case are similar to those of the two decided cases and I am of opinion that that part of the income of the trust which is set apart for the maintenance of the descendants of the donor is not exempt. The question should be answered accordingly. Question (2).-In this case the beneficiaries are not known, in the sense that to be a beneficiary a person must be poor and needy and such a person may at one time be eligible and at another time not eligible. The scheme of the Act is to tax the income whereve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances and has no means to meet his necessities in the opinion of at least three members of the Advisory Board constituted as hereinafter prescribed. (ii) and that the other half shall be utilised for the following charitable objects by way of helping Sunni Muslims, viz.: (a) To help the new converts to Islam of the Sunni-Sect by giving them necessary religious education and meeting their expenses food clothing and lodging during the period of such education. (b) To help the Muslim orphans of the Sunni Sect by giving them necessary religious education and meeting their expenses of food clothing and lodging until they are in a position in the opinion of the Muttavalli to earn their livelihood by their own work. (c) To make provision if the Muttavalli for the time being considers it necessary and advisable to do so for imparting to the new converts and orphans mentioned in clauses (a) and (b) above, secular education especially industrial and technical education and for meeting the expenses of food, clothing and lodging during the period of such education. (d) To help the deserving poor and needy Muslims of the Sunni Sect by way of giving them food clothing and lodging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... donor does not constitute a trust for charitable purposes within the meaning of Section 4(3) of the Income-tax Act, 1922. The Income-tax Officer recognised that the deed did constitute a public charitable trust in so far as it dealt with the other half of the net income. The Muthavalli challenged the validity of the assessment and when the matter came in due course before him, the Commissioner of Income-tax referred the following questions to this Court for decision under the provisions of Section 66(2) of the Income-tax Act: (i) Whether the provisions made in the Wakf deed dated the 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 as such fall within the scope of Section 4, Clause 3 (i), of the Indian Income-tax Act, 1922. (ii) 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. Section 4(3)(i) provides that the income derived from property held under trust or other legal obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. The Commissioner of Income- tax, Punjab*, Sir George Rankin said: Their Lordships are in agreement with this view and see nothing in the Indian Income-tax Act to discharge the Court of its responsibility in coming to a finding as to the character of the object of a trust-a matter which bears directly upon its validity. It is to be observed moreover, that under the Income-tax Act the test of general public utility is applicable not only to trusts in the English sense but is to be applied to property held under trust 'or other legal obligation'-a phrase which would include Moslem wakfs and Hindu endowments . In Dr. Umar Baksh v. The Commissioner of Income-tax, Punjab** the Lahore High Court expressly held that the expression religious or charitable purposes in Section 4(3)(i) has to be construed with reference to English law and not to the personal law of the assessee and this opinion was accepted by the Patna High Court in Humayun Raza Choudhury v. Commissioner of Income-tax, Bihar and Orissa***. The learned Advocate for the assessee (Muthavalli) has suggested that the decision of the Judicial Committee in The Trustees of Tribune Press, Lahore v. The Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X
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