COMMISSIONER OF INCOME TAX Vs. BOARD OF MUTWALLIS

JUDGEMENT

(1.) THIS is a reference under s. 66 (1) of the Indian IT Act, 1922. The assessment years, which are involved, are 1948-49 to 1958-59. The relevant accounting years for asst. yrs. 1948-49 to 1956-57 are the calendar years 1947 to 1955; the relevant accounting years for asst. yrs. 1957-58 and 1958-59 are the financial years respectively ending with 31st March, 1957, and 31st March, 1958. The question of law referred to this Court is:

(2.) THE reference has been made in the circumstances hereinafter stated in brief. One Ibrahim Sulaiman Salehjee, now deceased, executed a deed of wakf on 25th July, 1900, and thereby created a charitable trust. Hereunder are set out material portions from the said deed of wakf:

(3.) 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 IT Act. The ITO, however, made his own calculations and taxed a major portion of such income at the lower rate applicable under the first proviso to s. 41 (1) of the INdian IT Act, 1922. The exemption granted by the ITO related only to such portion of the income as had been actually applied to religious and charitable purposes, which only, according to the ITO, went towards the objects mentioned in the wakfnamah. Although the mutwallis had themselves offered a portion of the wakf income for taxation, they subsequently grew wiser aud took up the position that no part of the wakf income was taxable. IN appeals, against the assessment orders, before the AAC, it was therefore contended, on their behalf, that no portion of the wakf income should be taxed, inasmuch as the whole of it had been applied for public religious and charitable purposes. The AAC did not uphold the contentions raised on behalf of the assessee and, while confirming the orders passed by the ITO, he modified them to the extent that the income of the wakf estate was directed to be taxed under the first part of the proviso under s. 41 (1) of the IT Act at the maximum rate. Appeals were taken by the assessee before the Tribunal and the contentions raised before the Asstt. CIT were repeated before the Tribunal. The contentions appealed to the Tribunal and the appeals, which were heard together, were allowed with the following observation: