HAKIM ABDUL HAMID Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The assessee in this case is the Hamdard Dawa Khanna (Wakf) represented by its Mutawali Hakim Abdul Hamid. Up to 27th August 1948 the business styled as 'Hamdard Dawakhana' was carried on in partnership by Hakim Abdul Hamid, his brother Hakim Hafiz Mohd. Sayeed and their Mother Rabea Begum. By a Wakf deed dated 28th August 1948 the partners created a Trust in respect of the movable properties of the Hamdard Dawakhana. Under the terms of the Wakf deed the business income of the Hamdard Dawakhana of each year was divided into three portions, namely, (1) to be transferred to a Reserve Fund, (2) to be spent for charitable purposes, and (3) to be paid to the Mutawalis. The portion which was to be spent for charitable purposes was termed as Quami income and the portion which, was to be paid to the Mutawalis was termed the Khandani income. Rabea Begum died on 5-10-1949 and Hakim Hafiz Mohd. Sayeed was declared an evacuee with effect from 1-1-1948.

(2.) On 6-9-1950, Hakim Abdul Hamid purchased the share of the Khandani income receivable by his evacuee brother out of the charitable funds of the Wakf and this share was also earmarked for charitable objects by a declaration dated 6th September 1950 made by Hakim Abdul Hamid after 6-9-1950 and the profits of the Wakf business were to be allocated in the following manner under the Wakf Deed :-

(3.) For the assessment years under reference, namely, 1956-57 and 1957-58 for which the relevant previous years are the calendar years ending 31st December 1955 and 31st December 1956 respectively, the assessee in the returns filed by it claimed exemption in respect of the portion of the income which was set apart for being spent for charitable purposes and offered that portion of the income which was termed as Khandani income for assessment in the hands of Hakim Abdul Hamid. The Income-tax Officer granted exemption under Section 4(3) (i) of the Incometax Act, 1922, hereinafter referred to as the Act, for the income which was set apart for being spent for charities. The portion of the income which was .termed Khandani income was assessed in the personal hands of Hakim Abdul Hamid. There is no dispute with regard to the exemption granted in respect of the income set apart for charities and there is no dispute also with regard to the assessment of the Khandani income in the hands of Hakim Abdul Hamid.