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TMI Blog1967 (6) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... ereinafter stated in brief. One Ibrahim Sulaiman Salehjee, now deceased, executed a deed of wakf on July 25, 1900, and thereby created a charitable trust. Hereunder, are set out material portions from the said deed of wakf : 1. " ...... And whereas I am desirous of making wakf of the said land hereditaments hereinafter particularly described upon objects hereinafter mentioned with the motive of obtaining Suwab or religious merit as understood and laid down by the Mohamedan Law of the Haneefa Sect. 2. Now this indenture witnesseth that I do hereby make wakf valid and binding according to Mohamedan Law governing the Soonnee Sect to which I belong of all lands and properties hereinafter mentioned and divest myself of the ownership of the same and vest the same in the ownership of God the fruits and profits of the same to be spent on the objects mentioned in this deed ...... 3. The object or objects to which the income of wakf estate is to be applied is left to the discretion of the mutwallis appointed under this wakfnamah provided that the general rule to be observed is that the object or objects should be such as are calculated to bring to me Suwab or religious merit according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mood Ismail Salehji v. Ahmed Ebrahim Salehji), and had a long spell of existence in this court, so much so, that in the year 1954, Sarkar J. (thereafter Sarkar C.J. of the Supreme Court) observed in one of his orders in the suit " this suit has been in this court for years and has given rise to many proceedings. It is difficult to see who has benefited by the long and active life granted to it. In the last phase it acquired the movement of a shuttle-cock in a keenly contested game, of badminton ". Be that as it may, the wakf estate is now governed by a scheme framed by this court and the receiver appointed by this court is in possession or was so during all material times. How things fared under the receiver we do not know but we find that the income of the wakf estate is now subjected to large demands for public revenue. In the income-tax returns filed for the assessment years, hereinbefore mentioned, the mutwallis offered a portion of the income of wakf estate, in some of the assessment years, for taxation under the Income-tax Act. The Income-tax Officer, however, made his own calculations and taxed a major portion of such income at the lower rate applicable under the first pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en so, the mutwalli's powers have not been fettered, he may still refuse charity to the wakif's relations, if in his opinion, such a claimant to the charity was not poor .... In the case before us, all that we mean to say is that the object of charity as laid down under the deed is valid even under the general law, and if incidentally that object instead of being channelised in one direction only, namely, towards the non-relations of the wakif, is also channelised to become all--pervasive so as to include even the relations of the wakif, that portion of the charity, which has thereby gone to the poor relations of the wakif, does not cease to be a charity of a general nature. In that view of the matter it must, therefore, be held that even such charities are exempt under section 4(3)(i), even if the same has made to the poor relations of wakif." Mr. Gouri Mitter, learned counsel for the Commissioner of Income-tax, submitted that a charitable purpose would include relief to the poor, education, medical relief and advancement of any other object of general public utility. He did not dispute that clause (1), in paragraph 3 of the wakf deed, provided for relief to the poor and claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid the trustees shall give preference to the poor and indigent relations or members of the family of the said Sir Sassoon David, Bart., including therein distant and collateral relations ; provided further that in the application of the income of the said charitable trust fund the said trustees for the time being shall observe the following proportions, viz., that not less than half the income of the said funds shall at all times be applied for the benefit of the members of the Jewish community of Bombay only (including the relations of Sir Sassoon David, Bart., as aforesaid) and Jewish objects and particularly in giving donations to the members of the Jewish community of Bombay on the anniversary of the death of the said Sri Sassoon David, Bart., and his wife Lady Hannah David which falls on the twenty-second day of June and the remaining income for the benefit of all persons and objects including Jewish persons and objects and in such proportions as the said trustees may think proper. . . . . ." The question before the Supreme Court was whether the income from this trust fund was exempt from taxation as income of a charitable trust, under section 4(3)(i) of the Income-tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of commercial education. The persons eligible as beneficiaries under the fund were stated to be ' persons of either sex who are British-born subjects and who are desirous of educating themselves or obtaining tuition for a higher commercial career but whose means are insufficient or will not allow of their obtaining such education or tuition at their own expense. . . . ' The testatrix further directed that in selecting the beneficiaries ' it is my wish that the .... trustees shall give preference to any employees of John Batt Co. (London) Ltd. or any members of the families of such employees ; failing a sufficient number of beneficiaries under such description, then the persons eligible shall be any person of British birth as the trustees may select provided that the total income to be available for benefiting the preferred beneficiaries shall not in any one year be more than 75% of the total available income for that year." It was held, on a construction of the will, that the gift to the primary class from which the trustees could select the beneficiaries contained the necessary element of benefit to the public. . . ." In that context Upjohn J. observed : " If, when selecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re transferred to a trust. Clause (5) of the deed empowered the trustees to expend money on certain religious ceremonies for the repose of the soul of the members of the settlor's family. Clause (6) of the deed authorised the trustees to pay money towards the maintenance and support of lineal descendants of the children of settlor's father, the settlor's relatives " and or other indigent persons ". The Wealth-tax Officer held that the properties settled on trust were not entitled to exemption from wealth-tax, as the object of the trust was not charitable. In interpreting the deed, Tambe J. (V. S. Desai J. agreeing with him) observed : " The argument of Mr. Joshi is that clause 6 speaks of persons falling under two categories to whom the trustees could in their discretion make payment towards their support and maintenance. The first class or category consists of the lineal descendants of the children of Pestonji Pardiwala (father of the settlor) and/or any or more of the relatives, wife, children and family of Jehangir Pestonji Pardiwala, his brother and sisters ... the persons falling under the second category or class consist of ' indigent persons ' of whatsoever creed or natio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to construe is different from the deed that the Bombay High Court had to construe, and clause (4), according to him, had no reference to the indigent public but was confined only to indigent relatives of the wakif. He rounded up this branch of argument with the submission that the expression " charitable purpose " must be construed strictly. As a result of the decisions spread over a long period, the expression can only be applied to a public charity. There is no such thing as private charitable trust and if the income of a trust could be or was capable of being diverted to private charity the same must not be construed as a trust the income of which was exempt from assessment under section 4(3)(i) of the Indian Income-tax Act. Since clause (4), according to him, was wide enough to defeat the public charitable purpose of the wakf, the income from the trust should not be exempted from assessment under the Indian Income-tax Act. Dr. Debi Pal, learned counsel for the assessee, submitted that the paramount object of the wakf was relief to the poor and the dominant purpose was public charity. The provision for marriage and support of indigent relatives of the wakf, as in clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that this is a public and charitable trust, within the meaning of section 4(3)(i) of the Income-tax Act. " We do not feel that Dr. Pal is far wrong in his contention. Upon reading the deed of wakf as a whole, we are of the opinion that the purpose was predominantly charitable, in the sense that the purpose was for benefit of the public. The motive of the wakif, in creating the wakf estate, was to obtain " Suwab or religious merit as understood and laid down by the Mohamedan Law of the Haneefa Sect. " The motive was certainly the laudable motive of benefiting the mankind in general and thereby obtaining religious merit according to Mohamedan faith. By paragraph (3) of the deed, the mutawallis are at liberty to apply the income of the wakf for the purposes mentioned therein. The poor relatives and descendants of the wakif do not appear as preferential recipients of any of the several benefits mentioned in clauses (1) to (3) and (5) to (7) and, therefore, so far as those purposes are concerned, they certainly involve an element of public utility. It is true, as Mr. Mitter argues, that it is open to the mutwallis to spend the net income entirely for the purpose referred in clause (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the mutwallis. This argument proceeds under a misapprehension. Clause (8), it is not disputed, is charitable in nature. How much was spent under clause (4) and how much under clause (8) does not appear from the chart. It is true that expenses under clauses (4) and (8) together were heavier than expenses under clauses (1), (2), (3) and (5), (6) and (7), but, nevertheless, it does not appear that the expenses under clause (4) outbalanced the expenses for charity under other clauses. We cannot, therefore, make much of this argument. Mr. Mitter lastly contended that the expenses under clause (4) should not be excluded from taxation, particularly for those years which are covered by the amended section 4(3)(1) (amended in 1953 with effect from April 1, 1952). He relied on the Supreme Court decision in H.E.H. Nizam's Religious Endowments Trust v. Commissioner of Income-tax, in support of the contention. We ignore this argument because the question as framed does not accommodate this argument. In the view that we take we answer the question referred to this court in the affirmative. The Commissioner of Income-tax must pay the costs of this reference to the assessee. K. L. Roy J.- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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