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TMI Blog1978 (9) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... ciary ? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Officer having made an assessment under section 41(1) of the Indian Income-tax Act, 1922, on the waqf of which the assessee was the mutawalli, was not competent to assess the assessee as a beneficiary under the provisions of section 41(2) of the Act on the ground, inter alia, that the provisions of sections 41(1) and 41(2) are alternate ? " The assessment year in question is the year 1961-62. The dispute centres round the income derived by the assessee as a beneficiary from a waqf. This waqf was created by the assessee's grandfather, Haji Lal Mohammad, by a deed dated March 14,1942. Under this deed, the assessee and his brother, Haji Abdul Shakoor, wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. All that was done was that the business income of the waqf was computed by the ITO. The answer to this depends on the phraseology of s. 41 of the Act. The relevant s. 41(1) runs : " 41. (1) In the case of income, profits or gains chargeable under this Act......... any trustee............ (including the trustee or trustees under any waqf deed which is valid under the Mussalman Waqf Validating Act, 1913), are entitled to receive on behalf of any person, the tax shall be levied upon and recoverable from such............ trustee or trustees, in the like manner and to the same amount as it would be leviable upon and recoverable from the person on whose behalf such income, profits or gains are receivable, and all the provisions of this Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share of income received by the assessee from the business it is necessary in this connection to refer to s. 15A and s. 2(6AA) of the Indian I.T. Act, 1922. Section 15A runs thus : " The tax shall not be payable by an assessee in respect of such portion, if any, of the earned income included in his total income as is directed by the annual Central Act fixing rate or rates of tax for any year to be deducted in making an assessment for that year......." Section 2(6AA) defines " earned income " as : " Any income of an assessee who is an individual, Hindu undivided family, unregistered firm or other association of persons not being a company ......... (b) which is chargeable under the head ' Profits and gains of business, professio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ships observed as follows (p. 176) : "........ under the Mohamedan law the properties dedicated under a waqf deed belong to the Almighty ; it is only in the ideal sense, for the mutawalli in the name of the Almighty utilises the income for the purposes and for the benefit of the beneficiaries mentioned therein ...... property does not vest in the mutawalli, for he is merely a manager and not a trustee in the technical sense.' Section 41, however, equates the mutawalli of a waqf to the trustee. Nevertheless, as section 41 contains the word ' on behalf of any person ' it means that the mutawalli receives the income on behalf of the beneficiaries. This being so, the beneficiaries are the primary assessees, as is also apparent from s. 41( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the trustees, even though he had no beneficial interest in the income, the income would be earned income. The question is whether " earned income relief " can be denied to beneficiaries of a waqf, when a direct assessment is made on them. It has been already noticed that while assessing a trustee the assessment has to be made in the same manner as it would be made on a beneficiary. Now, while making the assessment, the ITO has not only to compute the income but has also to find out the source from which the income is received. The source has to be determined with reference to the beneficiaries, as s. 41 requires the assessment to be made " in the like manner and to the same amount as it would be leviable upon and recoverable from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a difference of opinion between two learned judges of this court, a third learned judge took the view that the income assessed in the hands of the assessee would be income from other sources, and as it did not arise from the personal exertion of the beneficiaries, the beneficiaries were not entitled to earned income relief. That decision is Haji Abdul Hameed v. CIT [1971] 82 ITR 495 (All). With respect, we are unable to subscribe to this view on account of the decisions of the Supreme Court referred to earlier. The first question is, accordingly, answered in the affirmative. So far as the second question is concerned, inasmuch as it gives the impression that an assessment had already been made on the trustees, which is not the case, it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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